• Russian Q2 economic growth accelerates to fastest rate in nearly four years

    Source: FxWire Pro - Commentary / 13 Aug 2017 10:27:59   America/New_York

    Russia’s second quarter growth accelerates to the most rapid rate in almost four years. The data released on Friday showed that the real GDP in Russia accelerated to 2.5 percent year-on-year growth from the first quarter’s 0.5 percent rate, marking the best print since the fourth quarter of 2013.

    According to a Wells Fargo research report, real net exports are expected to have boosted the GDP growth in the second quarter. On a nominal basis, trade surplus broadened in the second quarter on a year-on-year basis. Moreover, real consumer spending on goods and services are expected to have positively contributed to GDP growth in the second quarter as growth in real retail sales came back to positive territory in the second quarter after two years of sharp declines.

    The value of the Russian ruble had depreciated sharply in 2014. The depreciation had improved the price competitiveness of Russian goods and services and thereby aided in strengthening Russian exports. But it also had important indirect effects on consumer and investment spending. Ruble depreciation caused the headline inflation rate in Russia to accelerate sharply in 2015 that led to a swoon in real disposable income that resulted in marked softness in consumer spending.

    The past few years have been challenging for the Russian economy, as the depreciating ruble and skyrocketing inflation resulted in rapid tightening in monetary policy and severe recession. Recently, commodity prices and ruble stabilized, while inflation has slowed down. This in turn has permitted the central bank to bring its key policy rate back down, aiding to plant the seeds for the budding economic rebound that has taken root, noted Wells Fargo. In spite of the recent acceleration, economic growth in Russia is not expected to return to the 4 percent growth rates that Russia had recorded in 2010-2012.

    “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”, added Wells Fargo.

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