Russian macro: The economy gradually adjusts to geopolitical changes
Rosstat published 1Q23 GDP statistics (on the production side, so far), and it appears that the y-o-y economic contraction was not as deep as the previous flash estimate suggested. GDP fell by 1.8% y-o-y (instead of the 1.9% reported previously), which is not much compared with the -4.5%, -3.5%, and -2.7% y-o-y contractions in 2Q22, 3Q22, and 4Q22, respectively. Earlier, Rosstat reported that the output of the five basic sectors grew by 5.5% y-o-y in April, after 1.1% growth in March and a contraction of 2.3-2.5% in January and February (the figures are y-o-y. as well). Given that in April 2022, Russia's GDP contracted by 3.3% y-o-y, it looks as though the economy continued to grow m-o-m in April in seasonally adjusted terms.
The long-term implications of the recent shock could be comparable with the developments in the 1990s or after the 1917 revolution. These days, however, the economy has proved more adaptable and is likely to emerge on a different platform, becoming increasingly disconnected from the West. However, there is still a question of whether the economy can grow fast in the years to come.
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