Russian macro: Russian economy set to rebound in 2Q23
At the very end of April, we published a report on the trends in Russian industry (“Manufacturing to Gain Importance as a Driving Force”) and suggested that the country’s industrial sector would deliver quite strong growth in 2023 as a whole, especially in manufacturing. Looking at a broader range of statistics available for 1Q23 it appears that the output of the five basic sectors (industry, agriculture, construction, transport, and trade) decreased by 1.2% y-o-y in 1Q23, while it grew by 1.0% y-o-y in March. As this indicator is considered a monthly GDP proxy, it looks as though the Russian economy is on recovery path and so far, every new set of published statistics suggests that economic growth could well exceed 2% and even be close to 3% (assuming other factors' being equal). It looks as though the tipping point was reached in February-March, and the economy is likely to recover steadily.
Retail sales followed their m-o-m growth trend that began in May 2022 and keep rising gradually to deliver at least 4% growth this year. The services sector in Russia is booming as restaurants and catering segment grew by 10.7% in 1Q23 and by 14.9% in March (y-o-y). Paid services to consumers were up by around 4% y-o-y both in March and 1Q22 driven by local tourism, cultural events, and some other activities, with strong double-digit growth varying from over 10% to 33%. Wholesale trade was still down by about 10% (y-o-y in 1Q23 and March) as Russia’s foreign trade with “unfriendly” jurisdictions continued to shrink. Budgetary statistics and the foreign trade data also do not send too many warning signals. Recently the Russian Central Bank resumed publication of monthly foreign trade statistics, and the data show that imports have been growing. In March 2023, imports reached $27 bln, about the same level as in March 2021, when the economy was growing steadily. Normally, rising imports indicate that the economy is not in bad shape.
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