Key macroeconomic trends

1. Headline GDP and IP growth figures slightly undershot government and expert forecasts, causing quite a bit of negativity in the media.

2. Real disposable income again failed to grow, also causing concern.

3. Still, the upward trend in all these indices is also quite obvious.

4. CPI inflation reached a historic low of 2.5% y/y in December and 3.7% over 2017 (12-month running average). While this may be cause for concern, if the trend persists, for now it is helping boost spending.

5. Looking more closely at GDP and IP figures, the underperformance was largely caused by weaker growth in agriculture (attributable to cold spring and summer in a lot of regions, as well as a high base), and utilities (autumn and winter were much warmer than usual).

6. Actually, underlying data shows highly encouraging trends, as key leading indicators beat expectations. Fixed capital investment and cargo turnover grew strongly after a lackluster 2016 and dismal 2015.

7. Also, PPI inflation sped up notably. This may squeeze margins for some players, but also shows greater pricing power amid rising demand.

8. Looking at consumer spending and population well-being, retail trade finally managed to grow, even if modestly, after severe contraction.

9. Real wage growth also accelerated, supported by lower CPI inflation and maintained solid growth of nominal wages.

10. Also positively, unemployment receded significantly in 2017

In addition to import substitution, efficiency improvement has also become a key manufacturing and service growth driver. Exports of higher value-added goods are also growing markedly. Banking sector indices improve visibly, albeit loans to corporates are recovering more slowly. FDI inflows stay solid, while overall corporate debt burden decreases, improving market liquidity. Russia""s economy should continue recovering, with growth accelerating in 2018. Consumer activity remains the main concern, but should see further improvement. Products and services improving business efficiency, and production localization in Russia to serve as key investment opportunities.

详情下载附件