Yesterday, Rosstat released its first estimate of GDP growth in 2Q13 under an expenditure approach. As far as domestic demand is concerned, household consumption slowed to two-year low of 5.4% YoY, while fixed capital investment dropped 2.5% YoY. Cheering news, nevertheless, is that exports added a heavy 4.1% in annual terms (the fastest pace since 1Q12), while the growth in imports moderated significantly to 1.4% YoY (vs. 4.9% YoY a quarter ago and 9.5% YoY in 2012).
The released GDP breakdown underpins our view that consumer demand has been losing momentum on rising household savings rate, a moderation in wages growth in the private sector and elevated CPI that has eaten into real incomes. Nevertheless, consumer demand (representing 50% of GDP) remains the key supportive growth driver.
Investment demand looks more and more worrisome with an outright contraction in 1H13 owing to limited fiscal stimuli as well as the generally weak economic environment. We believe that a pickup in infrastructure spending as well as other initiatives (freeze on tariff growth, SMEs support, better business climate, lower cost of borrowing, etc.) would support a rebound in investments next year.
The only one bright spot in the report was the positive contribution from net exports. However, looking deeper into the details we would tend to treat it as a one-off. While imports decelerated owing to weaker local demand, exports benefited from the favourable base effect anda weather-related pickup in gas exports (the abnormally cold spring in Europe).
We expect to see full-year real GDP growth at 1.7% YoY in 2013 as we still expect technical drivers (better harvest, beneficial base effect for investment activity, spike in Europe’s demand for Russian gas, stronger disinflation, etc.) to spur growth in 3Q-4Q13.
Daria Isakova, Vladimir Kolychev
VTB Capital analyst
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