May GDP data was “much worse than expected”

The Russian economy continues to fall. Russia’s GDP in the first five months of this year decreased by 1% compared to the same period last year, according to the monitoring the socio-economic situation of economic development, published on 27 June. The decline in GDP in may, compared to may 2015 amounted to 0.8%. In comparison with April in may GDP fell by 0.1%.

Negative trends are observed in the sectors of mining, manufacturing, construction and retail trade. The positive end of the month, the Ministry of economic development calls the results in the sector of agriculture and in the production and distribution of electricity, gas and water.

Assessment of Vnesheconombank, is also presented on 27 June, the Russian economy in may declined more than estimated in the Ministry of economic development in may in comparison with April — by 0.4% and for Jan—may 2016, the GDP decline amounted to 1.1%. Assessment of the dynamics of GDP in may in annual terms, minus 1%.

Data for may was “much worse than most expectations,” said in the comments of the chief economist VEB Andrei Klepach. “Despite the most recent optimistic statements and rising oil prices, the statistics demonstrate that the change in economic dynamics is not yet happening. The economy continues to decline, despite improvement in the external environment and export growth,” he writes.

Klepach also said the record duration of the decline in retail sales, he continued for nine consecutive months. Incomes are volatile, and in April and may they began to decline in real terms. For industrial production the recent improvement in competitiveness is clearly insufficient to compensate for the effect of squeezing domestic demand. As a result, we are witnessing the decline of industrial output for the past three consecutive months,” the commentary said Andrei Klepach.

Previously, the HSE has indicated that over the last two months of spring the Russian economy fell by 2.5% compared to may 2015, which is still considered “the bottom of the current crisis.” “In April and may the state of the Russian economy sharply deteriorated, despite the increase in the price of Urals crude oil from $30 a barrel in January—February to $40 and $45 in April and may respectively. The deepening recession in these months was so great that, while maintaining economic activity at the level may drop in GDP for the year will be 1.5–2%, although we expect to see this fall only at an oil price of $35. It is hoped that at least the oil will resume its fall”, — emphasized in the report of the HSE Comments about the state and business”.

The Minister of economic development Alexei Ulyukayev remains confident that this year the Russian economy will fully emerge from recession. Low point of the recession passed, there is a rapid economic recovery. Since the third quarter, the Russian economy will show growth. The recession in the economy will completely cease by the end of this year”, — said the Minister at the St. Petersburg international economic forum.

The base forecast of Ministry of economic development suggests a decline of GDP by the end of 2016 at 0.3%. The world Bank forecast, which was published June 7, contains the assumption that Russia’s GDP in 2016 will be reduced by 1.2%, in 2017 will grow by 1.4%, and in 2018 — by 1.8%.