The economy adapts to new arrangements and recovers gradually

RUSSIA ECONOMICS - In Brief 31 May 2023 by Evgeny Gavrilenkov

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Rosstat released monthly economic statistics for April, which looks not too bad. Industrial output grew in April by 5.2% y-o-y, which brought the 4M23 growth to positive territory (0.4% y-o-y). In 1Q23, industrial output was down by 0.9% y-o-y. Seasonally adjusted m-o-m growth was up in April by 1.7%. The mining segment was still down 4M (by 1.8% y-o-y) but was up by 3.1% y-o-y in April. In 1Q23, mining declined by 3.3% y-o-y. Manufacturing grew y-o-y - in April and 4M23 (by 8.0% and 2.9%). Machinery, electronics, and production of electrical equipment posted growth by 20-30% last month, which lifted the 4M23 y-o-y tally up significantly. In April, vehicle (including cars) production grew by 27.3%, but it was still down by 20.9% y-o-y in 4M23. Car production increased in April by 33.0% y-o-y but was still down by 57.2% y-o-y in 4M23. Overall, the industry is heading toward 4.5% growth this year. Retail sales increased in April by 7.5% y-o-y. It almost pulled out the 4M23 tally from the negative territory (it was still down by a mere 0.1% y-o-y). Agriculture continued to expand by about 3.0% in both periods. Construction was up by 5.7% and 7.4% in April and 4M23 (both y-o-y). Overall, Russia’s April economic statistics proved that the economy adapts to new geopolitical arrangements, and economic growth may be well above expectations this year. We mentioned previously that GDP growth over 2% should not surprise. It can be even higher. So far, the output of the five basic sectors (a monthly proxy for GDP dynamics) was up y-o-y by 5.5% and 0.4% in April and 4M23, which confirms this view. In the seven days ending on May 29, inflation was a mere 0.08%, and the MTD tally mov...