Russian central bank expects lower GDP growth in the second quarter despite recovery in industrial output

21 May 2018

Russian gross domestic product is expected to expand by only 1-1.4 percent in the second quarter in year-on-year terms due to a high base effect in 2017, despite recovery in consumption and industrial output, the central bank said on Monday.

Russian GDP returned to growth of 1.5 percent last year, after two years of recession, on the back of higher oil prices, but was still short of a government target of 2 percent.

Lower economic activity in March forced the Russian central bank to revise its forecast of gross domestic product growth in the first quarter of 2018 to 1.3-1.5 percent from 1.5-1.8 percent, in year-on-year terms, it said in a document on Monday.

The central bank said that the main reason for the lower GDP forecast in the first quarter was the cold weather in March that increased production in energy sector but also decreased activity in the construction segment.

The central bank also said it didn’t take into account new U.S. sanctions against a number of Russian companies which were imposed in April and hit mainly Oleg Deripaska’s aluminum empire.

“The effect from the limitations, imposed by the U.S. Treasury Department on some Russian companies, depends on further scenarios and isn’t currently taken into account in the forecast,” the central bank said.

The United States imposed major sanctions on April 6, targeting some of Russia’s biggest companies and most prominent businessmen to punish the Kremlin for its alleged meddling in the 2016 U.S. election and other “malign activity”.

The central bank said it expected consumer activity to recover further in the second quarter. Industrial output in April is expected to rise by 1.3-1.8 percent from 1 percent in March in year on year terms, it said in the document.

The central bank forecasts 2018 GDP growth of 1.5-2 percent, while analysts polled by Reuters expect the economy to expand at an average of 1.7 percent this year.

Source: REUTERS