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GDP – growth slackens to just 1.2% YoY in 2Q13

According to the first Rosstat estimate, GDP grew a mere 1.2% YoY in 2Q13, down from 1.6% YoY in 1Q13 to the worst reading since the crisis (4Q09). The 1Q13 number is 0.7pp higher than the preliminary estimate provided by the Ministry for the Economy and above our 1.7% forecast.

The recent data is a disappointment and highlights that economic stimuli were needed at the start of the year to prevent internal demand growth slowing to below potential.

The contraction in investments (-1.7% YoY in 2Q13 vs. 0.1% YoY in 1Q13) on weaker fiscal spending and corporate lending was among the key drags on GDP growth over April-June, as in 1Q13, in our view. Meanwhile, the growth in consumption demand was not as supportive as it was at the beginning of this year, which could also have added to the slowdown.

Given the Rosstat data, the QoQ seasonally adjusted annualised growth (SAAR) dropped by a half to 0.7% in 2Q13, from 1.4% in 1Q13. Furthermore, WDA YoY growth also moderated, sliding to 1.3% YoY from 1.6% YoY in 1Q13.

This, together with the CBR's reluctance to intensify the monetary easing process and the postponement of infrastructure spending via the infrastructure bonds mechanism, has prompted us to revise our 2013 forecast. We now expect FY13 GDP growth of 1.7% YoY (previously 2.4% YoY) and the unemployment rate to increase to 6.2% (previously 5.7%). This would still imply a rebound in 2H13 on the back of the better harvest, faster fiscal spending YoY growth and a better base effect (especially in investment activity). We expect the 2Q13 YoY GDP growth reading to be weakest this year.  

Maxim Oreshkin, Daria Isakova
VTB Capital analyst

GDP, Russia

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