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GDP – growth little changed in 2Q14 at 0.8% YoY

Yesterday, Rosstat unveiled its preliminary estimate for 2Q14 economic growth at 0.8% YoY, a touch lower than the 0.9% in 1Q14.

In seasonally-adjusted QoQ terms, GDP growth was slightly positive in 2Q14, which means Russia managed to escape technical recession in 1H14. No details have been released, but from what we gather, net exports and milder inventory destocking must have made most of the difference for growth. The former was a product of robust gas exports to Europe and Ukraine, as well as trade-restrictions-driven import substitution.

In any case, that is a backward-looking indicator, while the outlook for 2H14 is grim: domestic demand is slowing further (which is also likely to weigh on inventories), gas exports are dropping, and import substitution is the only bright spot. We do not believe, though, import substitution will be strong enough to sustain even this meagre 1.0%-ish growth pace. Given the unfavourable base effect, growth in YoY terms is likely to dip into negative area.

Daria Isakova
VTB Capital analyst


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