6 Sep 2017 15:23

Central Bank analysts lower Russian GDP growth forecast in Q3-Q4 on weak industrial production data

MOSCOW. Sept 6 (Interfax) - Central Bank analysts have lowered their forecast for Russian GDP growth in Q3 from 0.6% to 0.4%-0.5% on a quarterly basis excluding seasonality, the Central Bank's Research and Forecasting Department said in its bulletin Talking Trends.

The estimate for October-December 2017 was also lowered from 0.6% to 0.4%.

"The main sources of the downward revision include the latest data from Rosstat on industrial production. However, strong data on the PMI-Indices continue to have, in their turn, a significant positive contribution to the GDP estimate," the analysts said.

Rosstat published data for industrial production in July which showed growth of only 1.1% as opposed to 3.5% in June and 5.6% in May, disappointing analysts and the Central Bank.

"The index estimate of GDP shows the likelihood of a slowdown of GDP growth rates in the second half of the year close to the potential level. Through this alone, the phase of renewed economic growth which began in the middle of last year after the recession in 2014-2016 is coming to an end," the analysts said.

According to Rosstat data, Russian GDP growth in Q2 2017 accelerated to 2.5% in annual terms, after growing 0.5% in Q1. This was the highest growth the economy had seen in annual terms since 2013, the analysts said.

"Even though the Russian economy has entered on a trajectory of slow but sustainable growth under 'new normal' conditions, the faster pace of GDP growth in early 2017 may to a significant extent have been due to the delayed effect of oil price growth in late 2016 and early 2017," the Central Bank said.

If seasonally adjusted, annualized GDP growth in the second half is close to 1.5%, then year-on-year growth in the third and fourth quarters would not drop below the current pace of 2.5%, the Central Bank said, adding that an upward revision of the GDP growth rate in late 2016-early 2017 by Rosstat could invalidate this reasoning.

"Under the aforementioned conditions, GDP growth for 2017 as a whole should be about 2%, of which potential growth would account for 1.5 percentage points, oil price dynamics for 0.3 pps and closure of the output shortfall for 0.2 pps," according to the bulletin.

It expects Russian GDP to grow 0.4% in Q1 2018.