The economy will likely avoid technical recession as May statistics look better

RUSSIA ECONOMICS - In Brief 03 Jul 2025 by Evgeny Gavrilenkov

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A few weeks ago, Rosstat reported that in 1Q25, the nation’s seasonally adjusted GDP contracted by 0.6% Q-o-Q. This publication fueled speculation about Russia's entering a recession, especially because April statistics didn’t impress, either. As technical recession implies negative economic growth for two consecutive quarters, this risk suddenly emerged after unexpectedly strong 4.3% economic growth in 2024. The majority of observers expected the economy to grow last year, but not that fast. Quarterly GDP statistics (as well as monthly sectoral data) indicated a sudden acceleration of reported economic growth in 4Q24, which could have occurred due to reporting/accounting issues. This used to happen in the past as well, as some unaccounted-for activities were incorporated in the 4Q data. Over time, statistics have been revised, and the final time series displays smoother patterns. We cannot rule out the same happening with the 2024 data. Hence, eventually, the 4Q24 seasonally adjusted Q-o-Q GDP growth may appear less impressive, while the 1Q25 Q-o-Q number may look better. So far, Rosstat reported that the 1Q25 GDP grew by 1.4% y-o-y, while investment in production capacity grew by 8.7% y-o-y over the same period. The output of the five basic sectors (a monthly flash estimate of economic activity) was up y-o-y by 1.4% in 5M25. Industrial output grew by 1.3%, agriculture grew by 1.5%, and retail sales increased by 2.3% (all in 5M25 y-o-y). In most cases, monthly statistics point to no deterioration in economic trends last month. At the same time, the CBR reported that in May, credit to households grew m-o-m for the third month in a row after four months of contraction s...