Russian GDP grew by 1.1 percent in the first five months of this year, according to estimates by the Economic Development Ministry. Economic Development Minister Alexei Ulyukayev says this trend will continue until the end of the year. “In order to have 0.5 percent growth for the year, there should be zero growth the rest of the time, and there is no reason for that,” he said.
In April, the Economic Development Ministry lowered its baseline economic growth forecast for 2014 from 2.5 percent to 0.5 percent, which implies a technical recession (a situation in which the economy contracts for two quarters in a row based on seasonally adjusted data).
The New Economic School and Renaissance Capital’s Macro Monitor shows that GDP may have risen by 0.9 percent year-on-year in the second quarter, as in the first quarter. Adjusted for seasonality, GDP may have gone from shrinking in the first quarter to growing 1.3 percent in the second. For 2014 as a whole, the monitors anticipate 1.6 percent economic growth, which is the highest known forecast.
Renaissance Capital and the New Economic School justify their overly optimistic forecast by referring to the completion of the destocking cycle, growth in wages in the public sector, increased exports, and higher budget revenues due to the depreciation of the ruble. They also point to hopes that the Ukraine crisis will deescalate. Investment activity remains the key risk to this forecast. According to the Macro Monitor report, geopolitical risks, financial instability, and higher Central Bank rates have forced businesses to table their investment projects.
First published in Russian at Vedomosti
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