Russia: Growth plummets in Q1 on broad-based frailties
GDP growth plunged to 0.5% year-on-year in the first quarter of 2019, according to a second estimate released by Rosstat. This was notably below Q4’s 2.7% outturn and matched the preliminary figure.
A breakdown by sectors revealed broad-based weakness across the economy. Notably, the wholesale and retail trade sector contracted 3.0% in annual terms, weighed on by the hike in the VAT that was introduced in January. In addition, the agricultural sector swung to contraction, declining 1.2% annually in Q1 (Q4: +2.3% year-on-year), while growth in the manufacturing sector picked up pace but remained muted (Q1: +0.6% yoy; Q4: +0.2% yoy). The construction sector also ground to a halt, recording zero growth after several major infrastructure projects were completed in 2018, while the government’s ‘National Projects’ program is off to a slow start.
Meanwhile, growth in the mining sector was relatively robust, clocking in at 4.6% in Q1, but was well below Q4’s multi-year high of 7.7% nonetheless. Although higher oil prices boosted the sector, soft demand from Europe—due to a relatively mild winter—and constrained output dragged on growth. On a more positive note, financial and insurance activities expanded at a brisk pace of 7.6% in the first quarter, broadly unchanged from Q4’s result.
Looking ahead, growth is seen slowing notably in 2019 on dampened household spending and limited oil exports.