OLGA IZRYADNOVA: GDP DYNAMICS INDICATORS REMAIN LOWER THAN LAST YEAR

According to data released by Rosstat, the products and services output index by basic type of economic activity in January-June 2019 amounted to 101.2% versus 103.7% a year earlier. The slowdown in Russia’s economic growth was caused by a significant decline in activity spreading across the economy as a whole.

Stagnation in the building construction complex increased due to a considerable fall in government investment in fixed capital coupled with a drop in the growth rate of private investment, which were taking place against the backdrop of an increase in capital outflows from Russia. The dynamics of retail trade turnover weakened to 101.7% (-1.2 pp. relative to H1 2018), which can be explained by a 1.3% drop in real personal income.

During the first 6 months of the current year, real wages and salaries increased by 1.8% relative to the same period of last year. There was an increase in the share of labor remuneration in the personal income structure, while the share of personal savings was on the decline. The unemployment rate remained low due to the labor market being actively regulated by the labor remuneration mechanism.

Over the course of 2019, the contribution of industry and agriculture to economic growth has so far been on decline. The industrial production index amounted to 102.6%, which represented a 0.3 pp. drop on the previous year.

The continuing positive dynamics in industry was determined by the fact that the movement of the corresponding indices in extractive industries notably accelerated relative to those in processing industries. As of the end of H1 2019, growth in output amounted to 101.9% vs. 104.0% in mineral extraction. The situation in processing industries was complicated by a considerable drop in demand for infrastructure services (that is, transport and wholesale trade services).

On the whole, the dynamics of GDP in January-June 2019 remained below last year’s indicators. When assessing the situation it should be borne in mind that unlike H1 2018, H1 2019 saw a decline in both exports and imports of goods. However, although the dynamics of various components of foreign-trade turnover was different, the contribution of net exports to the dynamics of GDP did increase, thus making it possible to mitigate the negative effect of the shrinkage in domestic demand.

As far as the short-term trends in the development of the Russian economy are concerned, it should be said that the resumption of positive dynamics in building construction and investment activities appears to be of primary importance, especially in the context of implementing Russia’s ambitious national projects.