According to the Ministry for the Economy, real annual GDP growth advanced to 2.6% in April, from 2.0% in March and 1.6% over the first quarter. However, adjusting for seasonal and calendar factors, the MoM change in GDP slowed to 0.1%, from 0.4% in March.
Commenting on the rather solid recent YoY IP growth, Deputy Minister for Economic Development Andrey Klepach mentioned that the underlying situation in industrial production was worrisome as investment demand and exports continued to deteriorate. The contraction in investments was due not only to a decrease in government investments, but also to weaker private investment activity.
Klepach again stated that at the moment Russia’s economy was experiencing a stagnation, and that it would likely recover in 3Q13.
We believe that the pick-up in March-April is not the start of a recovery but a short-lived increase in economic activity. The economy’s annual growth is set to deteriorate in May (as a result of the extended holidays), implying that the recent acceleration is fragile.
For the full-2Q13 we expect the real growth to be slightly below 2% YoY, but better than in 1Q13, implying that the economy is bottoming out. Later on in 3Q13, the favourable base effect is likely to underpin economic growth and then closer to the end of the year, the growth in the economy might be spurred by the effect of the monetary stimulus (we expect a 75bp cut in all short-term policy rates in total during the summer) and a mechanism of infrastructure bonds being launched by the end of the summer.
All in all, we see the FY13 figure at 2.4% YoY (under Brent at USD 105/bbl).