Russia’s 3Q21 GDP growth is in line with expectations, while elevated inflation boosts nominal GDP numbers

RUSSIA ECONOMICS - In Brief 18 Nov 2021 by Alexander Kudrin

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Rosstat published its flash estimate of the 3Q21 y-o-y GDP growth (4.3%), which appeared in line with expectations and didn’t challenge the view that in 2021 as a whole Russia’s GDP will grow by around 4.2%. Rosstat provided no more details on the 3Q21 GDP. No breakdown of growth by sectors, no seasonally adjusted Q-o-Q growth, no nominal number have been published yet. Though one may conclude that in 9M21 GDP expanded by around 4.7% y-o-y. Last year’s base effects are being gradually eliminated - therefore, economic growth is gradually returning to its moderate trajectory.Rosstat also reported that inflation w-o-w reached 0.18% in the seven days ending November 15. Unsurprisingly, the figure was higher than in the first week of November, i.e., during the mini-lockdown, but it was lower than the average weekly inflation in October. Cumulative inflation in two weeks of November reached 0.3%, while by November 15, the YTD figure reached 6.81%. Overall, inflation is moderating from an abnormally high m-o-m rate in October (1.1%), but will remain elevated in November and December as in these two months average monthly federal budgetary expenditure will be significantly higher than that seen in the previous months. However, inflation y-o-y is unlikely to accelerate due to a similar year-end spending spree from the federal budget in 2020. Inflation in 2021 as a whole can hover around 8% or even slightly below. Meanwhile, in 1Q22 inflation is expected to decelerate as budgetary spending won’t grow – at least in 1H22 or even 9M22, i.e., until the government realizes that revenues once again exceed the target and amends expenditures (as usually happens).High inflation recorded ...