The Russian industry contracted by 2.9% in 2020, as the OPEC+ deal pulled mining down while manufacturing grew moderately

RUSSIA ECONOMICS - In Brief 25 Jan 2021 by Alexander Kudrin

---

The contraction in 2Q20 and 3Q20 (by 6.7% and 4.8% y-o-y, accordingly) was deeper. After the initial shock caused by the pandemic in 2Q20, production was catching up almost all across the board. Mining was still down by 8.4% y-o-y in 4Q20 (and by 7.0% in 2020 as a whole). Manufacturing was up by 1.1% and 0.3% y-o-y over the same periods. In December alone, manufacturing was up by 4.4% y-o-y. According to Rosstat, in November and December, the seasonally adjusted industrial m-o-m growth having reached 1.8% and 1.5% pointed to a strong upturn. One can expect a continuously strong industrial performance in 2021 – at least in 1H21. As was mentioned in the previous notes, a decent flow of the federal budget revenues in 2H20 was a clear sign that the economy (industry in particular) was bouncing back.Various segments of manufacturing, such as the production of food and textiles, demonstrated robust growth. The activity in chemical and pharmaceutical sectors as well as in the machine-building was also strongly up. However, production of various vehicles was down by 12.7% in 2020, albeit in December it increased by over 13% y-o-y (with car production growing by 9.7% y-o-y last month). Hence strong growth is likely in 2021.Due to regular upward revisions of the previously published data and strong base effects, it is uneasy coming up with an accurate 2021 forecast. However, it looks as though industrial growth this year may beat GKEM Analytica’s forecast and be close to 5% (and possibly even more).Evgeny GavrilenkovAlexander Kudrin