BOFIT Viikkokatsaus / BOFIT Weekly 2019/30

Although Russian GDP grew by over 2 % last year, the pace of growth slowed to just 0.5 % in the first quarter of this year (BOFIT Weekly 21/2019). New data for June show manufacturing growth picked up in the second quarter to 3 %, while other sectors of the economy showed virtually no growth gains.

There was no on-year growth in construction in the first half, and growth in services was negligible. Growth in both goods transport and retail sales slowed in the second quarter to under 2 %.  The volume of services to households contracted by well over 1 % from 1H18.

The rise in real wages was also slower in the first half than in the same period last year. In June, real wages were 2.3 % higher than in June 2018. The real disposable incomes of Russians in 1H19 contracted by more than 1 % y-o-y. Household borrowing, in particular, helped fuel growth in retail sales. The household credit stock was up 23 % y-o-y in June. Notably, the rise in consumer credit has aroused concerns about excessive indebtedness (BOFIT Weekly 25/2019).

Part of Russia’s sluggish economic performance reflects a slowdown in the global economy, which, in turn, reflects the contraction in Russian exports. The latest balance-of-payments figures show that the value of exports and imports contracted in January-June by about 3 % y-o-y. Exports, in particular, took a nose-dive in the second quarter. Economic growth is expected to revive a bit in the second half of this year as the effects from planned public sector spending begin to kick in.