MinEconomy has suggested that in 4Q12 economic growth declined to 2.2% YoY, bringing the FY12 figure to 3.5% YoY. At the same time, December printed a slight rebound to 2.4% YoY (up from the 2.1% YoY in November). MinEconomy also said that in 2013 it sees GDP adding 2.2–2.4% YoY in 1H12 and 4+% YoY in 2H13, with FY13 at 3.6% YoY. Its estimate of potential GDP growth is now 4–5% YoY.
The FY12 GDP growth estimate of 3.5% is in line with our view. A growth rate of 2.2–2.4% in 1H13 is broadly in line with our scenario of USD 110/bbl Brent prices: we expect growth to remain stable within a 2.0–2.5% range in next couple of quarters. However, in order to achieve 4%+ YoY growth rates in 2H13, it would need to exceed 7% on QoQ SAAR basis, which would be higher than growth in 2H11 (6.2% on average), when it was supported by sharp increase in government spending, state wages and a boom in retail lending. To achieve the same demand growth this time, the effect of fiscal and monetary stimulus would have to be of a similar magnitude, in our view. We believe that this would not be sustainable and would cause a spike in inflation in 2014.
However, as we do not expect stimulus of such magnitude this year, we remain comfortable with our forecast of GDP growth of 2.6% (under the USD 110/bbl scenario), which assumes mild stimulus (the use of RUB 100bn of National Wealth Fund money for infrastructure spending and a cumulative 75bp cut in base rates). Growth might come even lower, at 2.2%, if oil prices decline to USD 95/bbl.
The story of overestimates provided by Russia’s officials remains unchanged. Russian authorities see potential GDP growth at much higher levels than our calculations (of 2.5–3.0% YoY), which increases the probability of excessive stimulus in 2H13.