GDP grew 0.7% y-o-y in 3Q14; no recession in 2014

RUSSIA ENERGY / FINANCE - In Brief 13 Nov 2014 by Marcel Salikhov

---

According to preliminary estimates from Rosstat, Russian GDP increased 0.7% y-o-y in 3Q. Economy was flat on seasonally adjusted quarterly basis. This means that economy didn’t plunge into recession in 3Q. Even assuming zero economic growth for 4Q14, yearly figure will be at 0.5-0.7% growth. It’s positive growth rates but substantially lower than 2013 (+1.3%). Economic growth in 3Q2014 was supported by growth in industry (+1.5% y-o-y) and surge in agricultural production (+11.0% y-o-y). Retail sales increased in 1.4% y-o-y in 3Q (compared to +1.9% in 2Q and +3.6% in 1Q) despite decline in real wages (-0.3% y-o-y). Consumers probably decided to spend their incomes on goods amid growing inflation and RUB depreciation. At the same construction fell 4.1% (-2.0% in 2Q). Probably there was a decline in fixed capital in 3Q (data for 3Q is not released; 2Q: - 1.4% y-o-y; 1Q: -4.8% y-o-y). To sum up, Russian economy showed resilience based on 3Q GDP data. We expect Russian economy to grow 0.7% in 2014 compared to official forecast from MED of 0.5% and Bloomberg consensus of 0.3%.