Russian GDP increases 4.9% in Q2 after 1.8% drop in Q1 - Rosstat

MOSCOW. Aug 11 (Interfax) - Russian GDP in Q2 2023 increased 4.9% compared to Q2 2022 after declining 1.8% in Q1, the State Statistics Service (Rosstat) said in a preliminary estimate on Friday.

The Rosstat data turned out to be slightly better than the 4.6% that the Economic Development Ministry and 4.8% that the Central Bank estimated.

"The index of the physical volume of GDP in Q2 2023 relative to Q2 2022, according to preliminary estimates, totaled 104.9%. The calculation used indicators of industry statistics that showed an increase in production in the following types of economic activity: passenger transport - 19.8%; wholesale trade - 12.5% manufacturing - 11.3%; construction - 9.8%; retail trade - 9.0%; agriculture - 2.9% and mineral extraction - 1.1%," Rosstat said in a comment.

Significant growth in Q2 in annual terms was expected and is largely due to the low baseline of Q2 last year, which was the low point of the decline in the Russian economy. As reported, in Q1 2022 there was an increase of 3.0% in annual terms, in Q2 a decline of 4.5%, in Q3 a decline of 3.5%, and in Q4, a decline of 2.7%. In general, in 2022, Russian GDP decreased 2.1%.

Rosstat has not yet given its assessment of GDP dynamics in general for H1 2023. The Economic Development Ministry previously estimated Russia's GDP growth in H1 2023 at 1.4%. Rosstat data indicate that growth for H1 2023 could be 1.5-1.6%.

Rosstat will present more detailed data on Russia's GDP in Q2 on September 8.

The Economic Development Ministry, commenting on the Rosstat data, said GDP dynamics in the second quarter of 2023 were better than the same both for the last year and for the second quarter of 2021. "The Russian economy not only compensated for the decline in the second quarter of last year, but also increased compared to two years ago. The main growth drivers were the real sector, primarily manufacturing, where output in the second quarter of 2023 increased by 11.3%. Machine-building and metallurgy contributed to the improvement, while growth was observed in almost all industries," said Deputy Economic Development Minister Polina Kryuchkova.

She said construction and agriculture, which rose 9.8% and 2.9%, respectively, maintained steady growth, as in the past year, and wholesale trade is recovering rapidly, up 12.5%. "It should also be mentioned that investment activity remains high," Kryuchkova said.

She said consumer demand recovery had a positive effect on GDP against the backdrop of "labor market stability and related growth in real incomes." Total retail trade, services and catering in Q2 2023 increased by 8.3%, exceeding the level of two years ago.

The Economic Development Ministry's official GDP growth forecast for 2023 is 1.2%, but the Russian president and prime minister, as well as the economic development minister, have said growth could exceed this figure. The Econ Ministry will adjust its forecast at the end of August.

The Central Bank of Russia raised its GDP growth forecast for 2023 to 1.5%-2.5% on July 21 from the 0.5%-2.0% projected in April. It expects year-on-year growth of 3.6% in Q3 and 1.5% in Q4 2023.

Analysts told Interfax in a consensus forecast at the beginning of August that they thought GDP would grow 2.1% in 2023.