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May and June GDP estimate revised down by MinEconomy

Last Friday, MinEconomy revised down its estimate of GDP growth in May and June from 1.0% YoY and 1.5% YoY to 0.2% YoY and 0.4% YoY, respectively. Meanwhile, the 1H13 growth estimate was also changed to 1.4% YoY vs. the 1.7% YoY announced recently.

Following Rosstat’s publication of GDP growth in 2Q13 at just 1.2% YoY (vs. MinEconomy’s forecast of 1.9% YoY), MinEconomy has corrected its previous estimates for the pace of the economy’s expansion in May and June. Although the weakness in May can be partly explained by a very unfavourable base effect (three less working days than in May 2012), the June reading remained near zero, which is alarming, in our view. Such a drastic deterioration in GDP growth will likely revert in 2H13 when the base effect will become much more favourable (especially in investments from September), growth in fiscal spending gains some momentum and the expectation for a good harvest is fulfilled.

However, given the lack of timely action from the authorities we will likely see FY13 GDP growth at less than just 2% (much lower than the expected global economic growth).

Maxim Oreshkin, Daria Isakova
VTB Capital analyst


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