According to MinEconomy, real GDP growth in February decreased further to 0.1% YoY, from 1.6% YoY in January. In 2mo13, Russia’s economy added 0.9% YoY (vs. 3.4% YoY in 2012). Adjusting for seasonal and calendar factors, the MoM change in GDP remained negative, but improved to -0.1%, from -0.3% in January. The key factors behind the drag were the YoY decline in exports and the slowdown in retail sales growth. The latter can be explained by the shift in households’ spending mode towards longer investments (in particular, mortgages for secondary housing have gradually been expanding), according to the Deputy Minister for Economic Development Andrey Klepach. He concluded that this is not a recession, but a pause.
February’s pause in the economy implies downside risks to our below consensus forecast of growth coming in at slightly less than 2% in 1Q13. During March, the pace of growth is likely to bounce back as a result of the cold weather and there no longer being a negative calendar factor, but it will nevertheless remain weak. Hence, we still expect the CBR to start easing as early as April in order to support the economy, which has almost stalled and is to be dragged down further by decelerating household spending and tighter fiscal policy.
In terms of the broader view, in 2H13 we see a chance of Russia’s GDP growth rebounding on monetary stimulus (we expect the first cut in key rates at the April monetary policy meeting and 75bp in total for FY13) and a mechanism of infrastructure bonds being launched, with RUB 100bn from the National Wealth Fund and RUB 300bn of pension money to be invested into infrastructure projects. All in all, we see the FY13 figure at 2.4% YoY (under Brent at USD 105/bbl) or 2.6% YoY (under USD 110/bbl).
Maxim Oreshkin, Daria Isakova
VTB Capital analyst
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