Russian Economy General News: #13

Rosstat estimates economic growth in the third quarter, by Elena Rozhkova for RBC. 11.13.2024.

Rosstat announced a slowdown in economic growth in the third quarter to 3.1% against 4.1% in the previous one. However, the growth was better than the Ministry of Economic Development estimated (2.9%). According to the Ministry of Economic Development, the economy grew by 4.2% in 9 months.

Economic growth in the third quarter of 2024 slowed to 3.1% year-on-year against 4.1% in the second quarter of 2024, according to a preliminary estimate by Rosstat published on Wednesday, November 13. "The index of physical volume of gross domestic product in the third quarter of 2024 relative to the same period in 2023, according to a preliminary estimate, was 103.1%," the agency said in a statement. The data was again provided without taking into account statistical information on the Donetsk and Luhansk People's Republics, as well as the Zaporizhia and Kherson regions.

The preliminary ("zero") assessment was made using the production method (the sum of the gross added value of all industries). Thus, in manufacturing, the added value grew by 6% in the third quarter of 2024 (compared to the same period of the previous year), in retail turnover - also by 6%. The first GDP estimate for the third quarter will be published on December 13.

In the second quarter of 2024, according to Rosstat , GDP growth was 4.1% year-on-year, which is lower than the first quarter figure of 5.4%.

Despite the slowdown, Rosstat’s preliminary estimate was higher than the Ministry of Economic Development’s estimate published at the end of October (plus 2.9% in the third quarter).

The Ministry of Economic Development, taking into account the data received from Rosstat, has clarified its estimate of economic growth for nine months: it amounted to 4.2% compared to the same period last year, the press service of the ministry reported. "The main driver was the manufacturing industry, where the machine-building complex made the greatest contribution. Thus, high indicators were demonstrated by the production of individual vehicles and equipment (including railcars, diesel locomotives, etc.), as well as the production of computers and electronics," the press service quotes Lev Denisov, director of the Department of Macroeconomic Analysis and Forecasting of the Ministry of Economic Development. In his opinion, the high level of consumer activity is supported by the growth of incomes of the population.

Economists from the Institute of Economic Forecasting (INF) of the Russian Academy of Sciences previously pointed out the slowdown in the Russian economy . First of all, according to experts, it is caused by the ongoing tightening of monetary policy (the Bank of Russia raised the key rate to a record 21% on October 25) and a frontal increase in other costs: wages, transaction costs in foreign trade, tariffs for transportation and housing and communal services, and the introduction of additional fees.

Economists at the Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF) predict the possibility of stagflation in Russia, that is, simultaneous stagnation (or decline) and high inflation. Due to the Central Bank's tight monetary policy, according to CMASF economists, the situation may develop according to the scenario of "shock with a decline in production" with a high potential for corporate bankruptcies and an increase in non-payments. To prevent the GDP dynamics from going into negative territory, "the Central Bank's key rate should be reduced to approximately 15-16% by mid-2025, CMASF economists point out. The Central Bank's current forecast assumes an average annual key rate during this period at 17-20%.

Nevertheless, based on the calculations based on the statistics available at the beginning of November, the INP RAS raised its forecast for GDP growth by the end of 2024: they expect the economy to grow by 3.9%, which coincides with the official forecast of the Ministry of Economic Development (a month earlier, the INP predicted annual GDP growth of 3.7%). The Bank of Russia's forecast assumes an increase in GDP this year by 3.5–4%.

On November 8, the Bank of Russia reported that the dynamics of industry financial flows it monitors indicate a gradual slowdown in economic activity at the beginning of the fourth quarter. In October, the volume of incoming payments made through the Bank of Russia payment system decreased by 2.9% compared to the average level of the third quarter of 2024, the Central Bank indicated.

https://www.rbc.ru/economics/13/11/2024/6734c10a9a794733a77c0506