Russian GDP Growth Jumps in Q2

Executive Summary

Real GDP growth in Russia climbed to 2.5 percent on a year-ago basis, topping expectations and marking the first print above 1 percent since the oil price slide began back in 2014. The past couple of years have been challenging for the Russian economy, as the plummeting ruble and skyrocketing inflation led to a rapid tightening in monetary policy and a severe recession. More recently, commodity prices and the ruble have stabilized, and inflation has receded. This in turn has allowed the central bank to bring its main policy rate back down, helping to plant the seeds for the budding economic recovery that has taken root. Despite the recent acceleration, economic growth in Russia is unlikely to return to the 4 percent growth rates that Russia achieved in 2010-2012, let alone the 7 percent annual average growth rate that the country was able to rack up between 2003 through 2008. Still-low commodity prices, economic sanctions and a declining working-age population will likely weigh on capital and labor growth, restraining the nation’s capacity to sustainably increase production over time.

GDP in Q2 Accelerates to Fastest Pace in Nearly Four Years

Data released today showed that real GDP in Russia accelerated to 2.5 percent year-over-year growth from the 0.5 percent pace registered in Q1, marking the best print since Q4-2013 (Figure 1). A breakdown of the real GDP data into its underlying demand components is not yet available, but real net exports likely played a role in boosting GDP growth in the second quarter. We do not have monthly data on exports and imports on a real basis, but the trade surplus widened on a nominal basis in the second quarter on a year-ago basis. Furthermore, real consumer spending on goods and services likely added positively to GDP growth in the second quarter as growth in real  retail sales edged back into positive territory in Q2 after two years of sharp declines (Figure 2).

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