Russian Economy Experiences Surge in Q4 2016
By Georgi Ninov - Research Analyst
Russia’s economy grew at 0.3% in Q4 2016 compared to the same time in the previous year. Facing a recession since 2014, the Russian economy has finally seen growth at the end of 2016, thanks to a variety of contributing factors.
Among the factors contributing to the growth is the 3.7% increase in exports, the strong performance of the ruble for 2016 (the ruble gained further 3% from the dollar since the beginning of 2017) and a prudent approach to inflation which grew 16% on average for 2015 but as of Q4 2016 was growing only at 6%. This in turn motivated the Central Bank to cut the policy rate from to 10 to 9.75% pa in March 2017.
The Russian economy still faces a variety of challenges however. Industrial production is growing slowly (1.3% for 2016), household income per capita decreased by a further 8.3% (it almost halved compared to 2013) and retail sales shrank for a second year in a row (-4.6%). Important sectors such as mining, manufacturing and constructions also experienced a setback in Q4 2016.
Nevertheless, for the whole 2016, growth continues to be negative, -0.2%. Forecasts indicate that in the period 2017-21, GDP growth will be positive but increasing at a slow rate – from 1.3% to 2%. Prognoses, however, are difficult, given the complex external relations of the country – the EU has shown no signs of relieving its current sanctions, the administration of President Trump has also had a knock on effect and Russia is still strongly dependent on oil prices.