Russian macro: recent Rosstat revision promises stronger growth in 2021-2022

RUSSIA ECONOMICS - Report 07 Jan 2022 by Evgeny Gavrilenkov and Alexander Kudrin

Rosstat announced at the very end of December 2021 that it had revised Russia’s annual GDP statistics for 2019-2020. The quarterly GDP numbers, however, have not been upgraded either for 9M21 or previous periods. Therefore, the revised annual numbers do not match the available quarterly statistics. As a result, the intra-year actual economic trends in 2019-2021 remain a kind of mystery. This time it is particularly inconvenient as there were strong base effects in 2020 and 2021. Rosstat will not revise quarterly GDP statistics and reconcile them with annual numbers until the end of 1Q22.

The agency upgraded 2019 GDP growth to 2.2% from the previously reported 2.0% and a much lower estimate (1.3%) published in early 2020. The new data also suggest that Russia’s GDP contracted by 2.7% in 2020 instead of the 3.0% reported previously. The revisions are too significant to be ignored as they should affect not only the 2021 GDP numbers but also the data for 2022 and beyond.

Permanent upward revisions of historical data are the reason that forecasters, including those from the government, very often underestimate Russia’s growth potential and forecast too-slow economic growth (or a deeper decline in times of crisis, such as in 2020). The reconstruction of the temporary missing quarterly GDP accounts based on the available statistics, including historical trends in industry, agriculture, retail trade, and a few other key sectors of the economy, can allow one to link the annual and quarterly national accounts and adjust the forecasts.

One conclusion that can be drawn from such a reconstruction is that in 2021, Russian GDP may have grown by around 4.4%, i. e., a bit higher than was thought earlier. The figure may even be above this level if Rosstat again adds previously unaccounted-for economic activity to the December 2021 statistics. High growth numbers in 4Q21 can create a strong base effect for y-o-y growth in 1H22. Therefore, another conclusion suggests that, since Russia’s growth potential generally looks higher in the aftermath of Rosstat’s aforementioned revisions of historical data while 4Q21 economic activity looks strong, Russian GDP growth may exceed 3% in 2022.

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