After a relatively positive performance for Russia’s economy in the first quarter, the second quarter has brought more of a reality check, with sharply lower numbers across many categories reported in April and May. The preliminary GDP estimate for April shows a contraction of 4.2% year on year, after a more modest decline of 2.2% (revised from a first estimate decline of 1.9%) for the first three months of the year. It is already clear from preliminary May data that the decline has worsened. At Macro-Advisory we expect a second-quarter drop of around 5% in GDP. To that extent the economy is not headed into the eye of the storm, which would imply a period of false calm ahead of a further battering, but is actually now in the worst period of the downturn.
But while the downward trend has accelerated, we expect to see a slight improvement in the third quarter and a much better fourth quarter with clear evidence to support the positive, albeit modest, growth expected for 2016. We don’t see any reason to adjust our current year forecast for a decline of 3.5% in GDP and a 0.5% recovery in 2016. This “worse before it gets better” assumption was also recently echoed by the International Monetary Fund (IMF) and by Russia’s Economy Ministry, both of which have somewhat improved their two-year outlook and are now close to our forecasts....Business New Europe | Opinion
MACRO ADVISOR: Russia’s recovery faces a reality check
Chris Weafer of Macro-Advisory
2 comments:
Last I heard, Russia had raised its sales tax and was cutting spending on social programs. Economics is not their strong point.
Actually, Putin is way more to the left that most of the Russian economists, the majority of whom are economic liberals in the Western mold and therefor see this crisis as an opportunity to "reform" Russia on the principle, never let a a good crisis go to waste. They would turn Russia into another Greece, or turn it back to the rule of the oligarchs ("job creators"), in order to make it "stronger in the long run." Alexei Kudrin, formerly Minister of Finance, is one of these and he resigned because Putin would not go along with his agenda.
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