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The Russian economy in June was able to demonstrate growth — for the first time in a year and a half. The Ministry of economic development, which was long and touched the bottom, awaiting the return of Russia’s GDP in a “positive plane”. However, analysts warned that it was premature of such statements and are reminiscent of a strong economic dependence on oil prices, which soon could fall to six-month lows.
The Russian economy has undergone a turning point. By the end of June, Russia’s GDP returned to a “green” zone, an increase of 0.1 percent after declining in may by 0.3%, says the report of Vnesheconombank (VEB).
This is the first monthly increase in GDP for more than a year and a half.
“In June, the economic dynamics had improved somewhat, partially offsetting the decline in may. We estimate that GDP was 0.1% higher than in the previous month, after declining in may by 0.3%”, — are reported words of the chief economist of Vnesheconombank, former Deputy Minister of economic development Andrei Klepach.
The positive dynamics of GDP in June to the greatest extent contributed to the manufacturing sector: their aggregated index with the removed seasonality increased by 0.6%. The contribution was provided by the growth of such sectors as transport (0.6 per cent), mining (0.1%) and manufacture of agricultural products (0,1%).
However, these positive factors were almost entirely offset by the negative impact on GDP dynamics of construction (-1,4%), paid services (-1,1%), wholesale and retail trade (-0.1%) and production of electricity, gas and water (-0,1%).
GDP growth in June, yet could not overcome the General trend: at the end of the second quarter, Russia’s GDP in annual terms fell by 0.7% of GDP.
The positive aspect is that the pace of economic contraction slowed in the first three months of 2016, Russia’s GDP fell by 1.2%. For comparison, in the first quarter of 2015, GDP decreased by 2.8%, while the second — 4.5%.
Thus, the second quarter of this year to some extent turned out to be the best in the last year and a half, showing the smallest decline.
Optimistic about the Russian economy adjusted and the Minister of economic development Alexei Ulyukayev. “Improving the situation in the real sector of the economy. If last year’s production decline was 3.7% in the first quarter of this year it was reduced to 1.2% in may to 0.8%. In the near future, we expect that GDP growth will be positive plane,” he said July 19. The scenario of economic development for 2015-2019, which was published in April 2016, in the baseline scenario it is projected that GDP in 2016 will fall 0.2% next year will grow by 0.8%, then the growth will accelerate to 1.8% in 2018, 2.2% in 2019. In 2015, Russia’s economy has shrunk by 3.7%. However, to speak of irreversible exit from the crisis and the beginning of stable growth is premature, analysts say.
“I think one month is impossible to judge — our analysis shows that there are constant fluctuations: one month production is improving in the other — comes back, — noted in conversation with “Газетой.Ru” head of the Economic expert group (EEG) Evsei Gurvich. We see that there are still negative factors: reduction in consumer demand, do not see investment growth.”
Besides all the calculations for GDP growth are made with some error, which you must remember to mention that “we started from the bottom”, recalls the Director of the Center for macroeconomic research of Sberbank Julia tseplyaeva. “Well, of course, that the results of June was better than may, but I think we need to look at another two months before to ascertain changes in trends,” — says Gurvich.
Even if the Russian economy will continue to grow in the following months, some risks remain that growth will be too slow. “We have poor prospects of recovery rate. Even if you are very lucky, it is hard to imagine that economic growth will accelerate to a level that we would as a country satisfied — 4% per year,” continues tseplyaeva.
“We’re talking about potential growth of 1.5–2%, and that’s our main sorrow. The recession ends sooner or later, and replaced her instead of the growth comes stagnation. And here stagnation, as shown by the Japanese experience, can last a very long time,” adds tseplyaeva.
The same factors that, according to the report of the Bank, contributed to the growth of Russian GDP in June, could be one-time and seasonal. “In some industries could be a one-time recovery, uneven work the MIC for example” — says Gurvich.
In addition, the experts recalled the strong dependence of the Russian economy on oil prices, which have recently again began to decline.
Thursday in electronic trading on the London and new York stock exchanges global oil prices continued to decline. August futures on light crude oil WTI on the new York Mercantile exchange (NYMEX) traded at $42,86 per barrel. On London’s ICE Futures exchange futures for Brent crude for September delivery fell 0.11% to $44,82 per barrel.
The analysts predict a further decline in oil prices. So, an analyst at Bank Societe Generale Wittner suggested that the level of support the price of oil is around $40 per barrel, but it is possible that the prices will fall and below this level. As experts of Bank Morgan Stanley does not exclude the fall in oil prices to $35. At this level it has not traded since February this year.
“Many expect that all of the second half they will be below $50 — I don’t believe that in such conditions the economy will go to growth,” concluded Gurvich.
