Category: Macro Monthly

According to estimates by the Ministry of Economy, Russia’s GDP expanded by 2.5% YoY in 8M23 and by 5.2% YoY in August 2023. The two key drivers of this recovery are rising output in the defense industry and strong domestic consumer demand.

The latest statistics show a strong GDP bounce in 2Q23 which was accompanied by a solid rise in growth rates in all major sectors of the economy.

The latest official data show a strong upswing in the growth trend. All major sectors of the economy – with one notable exception, the oil and gas industry – have demonstrated a solid recovery in 2Q in YoY terms.

Over the past month, two developments have stood out. One was expected and the other was not.

From purely a macro perspective the current state of the Russian economy looks very good. In the real economy industrial production, agricultural output, and construction volumes are on the rise.

The latest data show visible improvements in many key macro indicators: industrial production, construction, and agricultural output are growing in YoY terms as well as the real incomes of the population.

March and April should mark a watershed when a larger part of the Russian economy returns to growth. Although this will be primarily driven by a shift in the base factor, in certain instances positive drivers should also emerge because of the adaption to sanctions, as seen in the stabilization of economic output and demand, the logistical recovery, and the reorientation of trade.

GDP exceeded expectation in 2022. Despite the shortcomings of macro analysis in the current environment, the latest data points to improvements in the macro sphere.

A more challenging 2023. In 2023, four main factors will affect the economy. One is political, i.e., the geopolitical situation, the direction of the conflict in Ukraine, and associated sanctions. The other three factors are economic – exports, investments, and domestic demand. The same factors provided the macro backdrop for 2022.

In 2022, the economy adjusted to a dramatic change in the external environment. While this was accompanied by some painful losses – as seen in the big falls in the volumes of retail trade and auto production – these adjustments have also opened new growth opportunities for many segments of the economy from the financial sector and telecoms to manufacturing, transportation, and construction.