Russian economy to return to positive growth later in 2016

According to analysts from Wells Fargo, the Russian economy should return to positive, albeit lackluster, rates of growth later this year as consumer power recovers amid a receding inflation.

Key Quotes:

“Recently released data showed that real GDP in Russia contracted 1.2 percent on a year-ago basis in Q1-2016 (…) In short, it appears that the Russian economy is starting to flatten out after its nosedive last year. Indeed, we look for the year-over-year rate of GDP growth to return to positive territory again in the second half of this year.”

“Not only has the weakness in economic activity helped bring CPI inflation back down after its one-off spike last year, but the rebound in the value of the Russian ruble over the past few months has also contributed to the downward pressure on CPI inflation.”

“Although our currency strategy team looks for the ruble to give up some of its recent gains versus the U.S. dollar over the next year or so, it also does not believe it will return to the all-time lows that were set earlier this year.”

“As noted above, we look for real GDP growth to turn positive again in the second half of 2016. That said, a return to the 5 percent growth rates of 2010-2011, much less the super-charged rates that characterized the past decade, does not look achievable anytime soon. Geopolitical tensions have weakened foreign direct investment in Russia and low energy prices have weighed on production in the energy sector. Lackluster rates of GDP growth are probably the best that Russia can hope for at present.”

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