H1 recession prompts sharp downgrade to 2013 forecast
Preliminary estimates indicate that the economy slumped into a technical recession* in H1, following successive quarterly contractions. Such an outcome is extremely disappointing, particularly in the light of strong oil prices, which have averaged over US$100 per barrel. As a result, our forecast for real GDP growth this year has been downgraded to 1.5%, from 2.7% in our previous edition.
We expect a very modest rebound in activity during H2, spurred initially by the strength of this year’s harvest. Inflation should also fall back in the near term, following the Government’s decision to freeze certain state-regulated service tariffs next year. This should trigger a concerted monetary easing cycle, boosting real GDP growth to nearly 3% by 2014.
In the medium term, the economy’s poor demographic profile and slow pace of reform will constrain real GDP growth to less than 4%. We think that risks are skewed to the downside, with the recent slowdown highlighting the existence of serious structural deficiencies.
Contributions to GDP growth
Source: Oxford Economics.
Source: Federal State Statistics Service; Haver Analytics.
* A technical recession is defined by two consecutive quarters of negative economic growth as measured by a country’s GDP
Visit the ey.com Russia page here