A marked deceleration in economic growth in March provided further evidence on Monday that after a strong start to the year, Russia is feeling the chill from a cooling global economy.
Russia’s gross domestic product (GDP) grew 3.2 per cent in March, year-on-year, Economy Minister Elvira Nabiullina said, down from a 4.8 per cent annual growth recorded in February.
March’s growth rate was also below the 3.9 per cent annual rate recorded in January, and the 4.3 per cent seen in 2011.
“The (growth) rate does not look high but a change of the nature of economic expansion stands behind the numbers,” Ms. Nabiullina told a meeting at the Economy Ministry.
“The phase of post-crisis recovery growth is over, accumulation of inventories has stopped. And further economic growth is driven by an increase in internal consumer investment demand with a stronger tendency towards import substitution.”
Russia’s economy, which slumped by 8 per cent in 2009, recovered its pre-crisis level at the end of last year.
Deputy Economy Minister Andrei Klepach later told journalists that on a seasonally-adjusted basis, monthly GDP fell by 0.6 per cent in March, having risen by 0.5 per cent in February compared with January.
“There was some kind of investment pause (in March),” he said. “We expect the pace of growth to increase in the second quarter... in part from the investment component.”
Economists were not surprised by the weaker GDP data, which comes a few days after other recent economic data that also pointed to declining growth momentum.
Last week, the Federal Statistics Service published data on investment and retail sales that showed that while consumption continues to grow at a healthy pace, investment growth has slowed markedly.
Weaker GDP growth is also consistent with data on industrial output, which stagnated in March, with growth falling to 2.0 per cent from 6.5 per cent in February.
“The moderation in March is in line with what we expected,” said Alexander Morozov, chief economist at HSBC in Moscow.
“Basically what we see is that export demand, which is the key driver for Russian economic growth, remains pretty weak.”
In recent months, economic activity has nevertheless been supported by rapidly rising domestic demand, helped by significant budget expenditures in the run-up to March 4 presidential elections.
But with the elections - won overwhelmingly by Prime Minister Vladimir Putin - now out the way, the government is reining in its fiscal stimulus.
Russia’s macroeconomic indicators have also been distorted over recent months by statistical factors, which exaggerate the extent of the slowdown visible between February and March.
Output in February was boosted by an extra working day, caused by the leap year, while in March there was one less working day compared with the same month in 2011.
“I would say the March data is a bit distorted on the downside by negative base effects. Adjusted for that, the trend growth in March was probably closer to 3.5 per cent,” said Mr. Morozov.
In the last Reuters poll of analysts in late March, economists expected that Russia’s GDP would grow by 3.7 per cent in 2012, implying a moderate slowdown compared with last year’s 4.3 per cent.
The Economy Ministry earlier this month revised down its 2012 growth forecast, from 3.7 to 3.4 per cent.