Russia's GDP increases for the first time in a year

After plunging in mid-2022 due to the war, Russia's GDP gradually narrowed the decline and increased again in the second quarter of this year.

Preliminary estimates from the Russian Federal Statistics Service on August 11 showed that the country's GDP grew by 4.9% in the second quarter compared to the same period last year. This is the first time in a year that the Russian economy has grown.

The data showed that almost all activities, from transportation, wholesale, processing, construction, retail, agriculture and mining, increased. Previously, the Russian statistics agency also revised the first quarter GDP decline from 1.9% to 1.8%.

Russia’s economy has been in a tailspin since mid-last year, when GDP shrank 4.5% following the military campaign in Ukraine. The decline has narrowed in subsequent quarters. Bloomberg believes the economy could return to pre-conflict levels as early as next year, as it adjusts to the impact of Western sanctions.

Outside the Starbucks replacement store chain in Moscow in August 2022. Photo: Reuters

"If we talk about full-year figures, Russia will surpass 2021 in 2024," Evgeny Koshelev, an economist at Rosbank, Russia, predicted. Natalia Lavrova, chief economist at BCS Financial Group, also said that Russia's GDP could grow by 2% this year and reach pre-conflict levels next year.

Russia's economic performance is going against forecasts from early last year, when the West thought Russia would collapse because of unprecedented sanctions.

But this did not happen. Increased defense spending boosted industrial production. Meanwhile, consumer demand also increased thanks to support policies and rising wages.

Still, Russia faces challenges, including labor shortages and a weak currency. The ruble has lost 25 percent of its value against the dollar this year, approaching 100 rubles to the dollar.

Russia’s Central Bank Governor Elvira Nabiullina blamed the decline on a decline in foreign trade. While imports have remained stable, Russia’s energy exports are lower than last year. Its current account surplus is now at a two-year low.

The Russian Central Bank recently raised its growth forecast for this year to 1.5-2.5%. It said output in most sectors focused on domestic consumption has reached or exceeded pre-war levels. Next year, Russia’s GDP is forecast to grow by 0.5-2.5%.

Ha Thu (according to TASS, Bloomberg)

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