Russian economy down by 8,5% in second quarter

After growing by 1,6% in the first quarter of 2020, Russia’s GDP fell by 8,5% in the second quarter due to the lockdown and quarantine measures imposed across the country, reports bne IntelliNews citing citing the Russian Federal State Statistics Service’s data. However, the damage to the national economy turned out to be less significant than expected. Earlier, the Ministry of Economic Development estimated the drop in GDP in the second quarter at 9,6%, while the Central Bank expected a decline of 9-10%.

In the second quarter, many industries were shuttered due to the restrictive measures caused by the COVID-19 epidemic. Nonetheless, the economy contracted less than during the crises of 1998 and 2009. The latter brought a drop of 11,2% in the second quarter of the corresponding year, while in 1998, the most significant decline of 9,1% was recorded in the fourth quarter.

The decline was registered in almost all sectors of Russia’s economy with the maximum drops noted in the commodity sector, retail trade, passenger transportation and industries related to the provision of services to the population. Manufacturing, construction, wholesale and cargo transportation were among less affected industries. Industrial production was down by 8,5% year on year, while the national oil sector showed a decline in output of 10,3%. Retail turnover decreased by 16,6%, passenger turnover — by 79,0%, catering — by 48,9%. The volume of paid services to the population fell by 37,2%. Agriculture became the only sector that continued to grow with an increase of 3,1% year on year.

“While the slump in GDP in the second quarter was fully expected, its lower reading is positive, as it means that the 2020 decline in the economy could be less dramatic," considers BCS Global Markets, which expected the decline to be 2% deeper. Nonetheless, the company’s Chief Economist Vladimir Tikhomirov warns that the encouraging data may be offset by weaker performance in the second half of the year. “In our 2020 forecast, we expected to see a deeper slide in GDP in the second quarter but a more robust recovery in the second half of the year than suggested by the latest macro data," he says. BCS GM reaffirms its 2020 GDP decline forecast of 3,8% year on year, which is more optimistic than both the official (-4,8%) and consensus forecasts (-4,2%). The latter was compiled by Interfax at the end of July based on a survey of analysts of leading investment companies, banks and think tanks.