Russian Economics: An Overview

Pertinent to cover Russia since Putin has recently won. I noticed a credible source recently guesstimated Putin would be in power until 2030. 

I have included Russia’s ”official” Use of GDP report and stats. Details below are from FSSS (Russia), LTCI and from a March 2018 report from our content partner FocusEconomics. 



Use of GDP

2016






2017

I quarter
II quarter
I half
III quarter
9 months
IV quarter
Year
I quarter

at current prices; billion roubles
Gross Domestic Product at market prices
18815.9
20429.6
39245.5
22721.2
61966.8
24076.9
86043.6
20090.9
of which: 








final consumption expenditures
14245.2
14497.0
28742.2
15203.7
43945.9
15876.8
59822.7
15064.1
households 
10357.8
10553.8
20911.6
11218.7
32130.3
11811.1
43941.4
10976.7
public administration
3806.0
3860.7
7666.7
3901.6
11568.3
3981.1
15549.4
3995.6
non-profit institutions serving households
81.4
82.5
163.9
83.4
247.3
84.6
331.9
91.8
gross capital formation
2981.8
4422.6
7404.4
6440.8
13845.2
6286.9
20132.1
3033.5
gross fixed capital formation *
2907.9
3912.4
6820.3
4392.7
11213.0
6899.4
18112.4
3022.1
changes in inventories
73.9
510.2
584.1
2048.1
2632.2
-612.5
2019.7
11.4
net exports of goods and services
1326.3
1064.1
2390.4
712.4
3102.8
1335.7
4438.5
1720.0
statistical descrepancy
262.6
445.9
708.5
364.3
1072.9
577.5
1650.3
273.3

volume indices; at constant prices,
percent of corresponding period of previous year
Gross Domestic Product
99.6
99.5
99.5
99.6
99.6
100.3
99.8
100.5
final consumption expenditures
96.7
95.5
96.1
96.3
96.2
97.5
96.5
102.1
households 
95.7
94.1
94.9
95.2
95.0
96.8
95.5
102.7
public administration
99.6
99.5
99.5
99.5
99.5
99.5
99.5
100.4
non-profit institutions serving households
100.8
100.7
100.8
100.7
100.7
100.8
100.7
100.0
gross capital formation * 
102.5
101.6
102.0
99.9
101.0
102.7
101.5
100.1
exports   
99.7
104.9
102.3
104.2
102.9
103.7
103.1
107.1
imports
92.2
95.4
93.8
96.3
94.8
100.4
96.2
116.5
*    Including aquisition less disposals valuables.


OVERVIEW | Incoming data suggests that Russia’s economic recovery was broadly steady in recent months, although growth likely remained lackluster. The manufacturing PMI fell to the lowest level since July 2017 in February, and the Ural oil price also lost some recent gains. However, industrial production expanded notably in January, after two months of contraction, while exports grew at a double-digit pace in December, the latest month for which data is available. Overall, the economy has come a long way since the 2015–2016 recession, and on 23 February, S&P Global Ratings upgraded Russia to investment grade status after three years at junk— raising the rating from BBB- to BB+ with a stable outlook. The move sparked a rally in Russian assets. President Vladimir Putin's win is a continuation of current economic policy.

In his annual state of the nation address on 1 March, which was postponed to coincide with the election, Putin outlined his key priorities for a fourth presidential term. The speech centered on boosting state spending on infrastructure and social measures, and the president made pledges to raise life expectancy, increase GDP and lower the poverty rate. Concrete details on how these measures would be funded are not yet known, although Putin stated that improving the efficiency of government spending could generate funds. Overall, Russia’s fiscal picture has become brighter thanks to higher oil prices, strong demand for the country’s bonds and a change in fiscal rules, which should give the government room to adjust the budget. Putin also unveiled a wide array of new weapons and struck a bellicose tone in the speech, suggesting that the relationship between Russia and the west will remain tense. Looking ahead, the economy’s moderate recovery should continue this year, benefiting from monetary policy easing, higher oil prices and healthy household consumption. The production cut deal with OPEC will, however, keep oil output limited, capping the country’s export performance. Moreover, the recovery has been lackluster, as the economy is burdened with structural issues and is still to a large extent dependent on the energy sector. FocusEconomics Consensus Forecast panelists see GDP expanding at 1.8% in 2018, which is down 0.1 percentage points from last month’s forecast. Panelists expect the economy to expand 1.8% in 2019.

CENBANK - MONETARY SECTOR | Inflation edge down in January
In January, consumer prices rose 0.3% from the previous month, a notch below the 0.4% month-on-month rise observed in December. According to the Federal State Statistics Service (Rosstat), the result largely reflected a smaller rise in prices for foodstuffs. Inflation remained edged down to a new historic low of 2.2% in January, below December’s 2.5%. Price pressures have fallen notably in 2017, in part due to a solid performance by the ruble. Inflation lies far below the Central Bank’s target of 4.0%. Annual average inflation also declined from 3.7% in December to 3.5% in January, another historical low. Panelists see inflation ending 2018 at 4.0%, which is unchanged from last month’s forecast. For 2019, participants expect inflation to end the year at also 4.0%.

Central Bank cuts key interest rate to 7.50% in February At its 9 February meeting, the Board of Directors of the Central Bank of the Russian Federation (CBR) decided to cut the key interest rate by 25 basis points to 7.50%, a move widely expected by market analysts. The decision followed a larger-than-expected 50 basis-points reduction in December and marks the lowest policy rate since June 2014, continuing the CBR’s monetary easing cycle. The Bank’s decision came after inflationary pressures moderated in recent months, with inflation easing to a record-low 2.2% in January, significantly below the official 4% target. Adjusting its assessment of inflation, the CBR noted that permanent factors may be exerting a stronger effect on inflation dynamics than temporary ones, as previously thought. According to the communiqué, effects from a strong rubble and downward pressures from food prices are expected to subside by the end of the first half of 2018. Weak economic activity in the final quarter of 2017 also contributed to the Bank’s decision to cut its policy rate, even as it acknowledged the reasons behind the slowdown remain somewhat uncertain. Against this backdrop, the Bank decided that the buildup of risks has slightly shifted towards the economic growth front. It did not see significant upward risks to inflation in 2018 and saw inflation likely falling short of its target this year. As a result, the CBR highlighted its commitment to continue cutting the policy rate and “complete the transition from a moderately tight to neutral monetary policy in 2018.” The sustained easing of policy should help generate the conditions for inflation to pick up and approach the Bank’s target by the end of 2019 rather than the end of 2018, departing from the assessment at its December meeting. Meanwhile, the Bank maintained its medium-term outlook (2019–2020) from its previous meeting, noting that upside risks to inflation continue to prevail over the risk that inflation will significantly deviate downwards from its target. These upside risks include elevated inflation expectations, lower propensity to save among households and wage growth outpacing productivity growth due to labor shortages.

EXTERNAL SECTOR | Export growth wanes moderately in December Merchandise exports totaled USD 37.9 billion in December, which represents a robust 21.1% increase compared with the USD 31.3 billion observed in the same month of 2016. The expansion was below November’s 25.2% increase. Supportive global conditions and higher commodity prices have led to Russian exports surging in recent months. Imports increased 23.9% annually in December, slightly above November’s 23.5% increase and came in at USD 24.2 billion. The trade surplus came in at USD 13.7 billion, which was larger than the USD 11.8 billion surplus seen in December 2016. The external sector recovered notably in 2017 and the trade surplus rose from 2016’s USD 90.3 billion to USD 115.3 billion. The reading was supported by double-digit growth in exports, which surged 25.9% last year (2016: -16.7%). Imports also expanded at a quick pace, illustrating the economy’s recovery. Imports grew 24.8% in 2017 (2016: -1.3%). The analysts we surveyed this month project Russia’s exports to reach USD 383 billion in 2018. Going forward, panelists expect exports to reach USD 400 billion in 2019.





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Consumer Price Index

 (end of period)


2016



2017

II quarter
III quarter
IV quarter
I quarter
II quarter

percent of December of previous year    
Consumer price index for products and services
103.3
104.1
105.4
101.0
102.3
food products (including alcoholic beverages)
103.2
102.4
104.6
101.2
103.4
non-food products
103.8
105.2
106.5
100.9
101.3
services
102.7
104.8
104.9
100.8
102.0



Sources: FocusEconomics and Federal State Statistics Service (Russia).