Russia: GDP muted in 2017, but look forward not back

On the face of it, the 1.5% GDP print for 2017 after -0.2% in 2016 should be welcomed confirming the economic recovery. But pundits and the market are most likely to look past that fact and say the figure undershot consensus of 1.7%.

At ING, we also expected 1.7% while the official forecast was 2.1%, even though the MinEco turned less optimistic in late 2017 with a 1.4-1.8% range. Pessimists may also note that the annual figure assumes growth moderation to 1.2% in 4Q17 vs 1.8% in 3Q and 2.5% in 2Q. And last (but not the least) common comment could be that all this happened despite the rise in oil prices over 2017.

If we analyse the breakdown, the biggest driver was private consumption (1.8ppt vs -1.5ppt in 2016), inventories (1ppt vs-0.6ppt)) and investments (0.8ppt vs 0.2ppt). Government consumption cut 0.2ppt after adding the same amount in 2016. Exports added 1.4ppt (vs 0.9ppt), but it was more than offset by imports (-3.5ppt vs +0.7ppt). Production-wise, we got the well-known picture of the goods-producing sectors dragging the GDP down after adding only 0.2ppt vs 0.1ppt in 2016, but services sector contributed around 1.2ppt vs -0.3ppt in 2017.

Assuming the previously-released quarterly figures are correct, we can also make some interesting inferences about the fourth quarter growth. First, private consumption pace could have moderated to 1.6%YoY from 5.2% in 3Q17, which looks at odds with our consumption proxy (retail and services) accelerating from 1.7% to 2.4%. Online shopping and abroad travel could be a reason for the difference, but we believe the earlier quarterly data was not fully correct and could be revised. Second, investments growth could have moderated to 2.4%YoY over 4Q17 vs 3.9-6.4% in 2Q-3Q17.

Finally, exports growth could have firmed from 4.5% to 6.5% in 4Q17, while imports pace lost some steam and eased from 16.3% to 14.8%.