Rosstat preliminary estimated the fall in GDP in the third quarter at 4%

The fall in Russia’s GDP in the III quarter continued and amounted to 4% in annual terms after a reduction of 4.1% in April-June, follows from the preliminary data of Rosstat. The Ministry of Economic Development previously estimated the decline in the indicator for the III quarter at 4.4%.

When calculating, indicators of industry statistics were used, some of which influenced the decline in the indicator, Rosstat notes. The fall is recorded in wholesale trade turnover (by 22.6%), water supply, sanitation, organization of waste collection and disposal (by 10.4%), retail trade turnover (by 9.1%), cargo turnover (by 5.5%), in manufacturing industries (by 2.0%). Growth was demonstrated by agriculture (by 6.2%) and construction (by 6.7%).

The preliminary estimate of GDP for the third quarter was made on the basis of the production method and is based on the operational statistical reporting of large and medium-sized enterprises in the non-financial sector of the economy.

According to the Ministry of Economic Development, in September the fall in GDP accelerated to 5% after 4.1% in August and 4.3% in June. The dynamics of GDP is close to the forecast trajectory and will amount to -2.9% by the end of 2022, according to the September review of the Ministry of Economic Development “On the current situation”. In the first quarter of 2022, according to Rosstat, the economy grew by 3.5%.

The head of the Ministry of Economic Development, Maxim Reshetnikov, noted at the end of October that the Russian economy, on a quarterly basis, will move to growth at the end of this year. According to him, now the economy is actively reconfiguring foreign economic relations and structural adaptation, this process, judging by the statistics, is going faster than previously thought.

The Bank of Russia in its report on monetary policy estimated the decline in GDP in the III quarter at 4% in annual terms. “The dynamics of business activity in the third quarter was better than the Bank of Russia had previously predicted. The release was supported by the dynamics of industrial production, the volume of construction work and retail sales, as well as activity in the agricultural sector, where a record harvest is expected this year,” the Central Bank noted in the review. At the same time, in September, operational indicators point to a decrease in economic activity due to increased uncertainty against the backdrop of increased geopolitical tensions and partial mobilization. According to the forecast of the Central Bank, in the IV quarter the economy will contract by 7.1%.

According to the updated baseline forecast of the Bank of Russia, the decline in GDP in 2022 will be 3.0-3.5% -2025 the economy will grow at 2.6% per year.

In October, the World Bank (WB) improved its estimate of the decline in the Russian economy in 2022 from 8.9% to 4.5%. The forecast was developed on the assumption that the conflict in Ukraine will continue and the Russian economy will continue to be under pressure from sanctions, including those coming into force at the end of this year (a partial embargo on Russian oil and oil products), the WB report said.

Mining, transport and wholesale trade could make the largest negative contribution to output in the third quarter, as these three industries were hit by a drop in natural gas supplies abroad, said Alexander Isakov, chief economist for Russia and the CIS at Bloomberg. Their cumulative contribution could be about half a percentage point (pp) of the total drop, Isakov estimates: another 0.4 percentage points. the fall was provided by the commercial real estate sector.

The contribution from the mobilization was rather unnoticeable in the third quarter, and the increase in federal budget spending on activities related to it will be reflected as an increase in the public sector, Isakov notes. The mobilization, announced in September, did not have time to have a significant impact on the economic performance of the third quarter, agrees the director of the analytical department of the Investment Company “Region” Valery Vaysberg. The deterioration of the situation in wholesale trade was offset by agriculture, construction, and overall consumer demand (trade, services, public catering) increased, Weisberg notes.

According to Isakov, the decline in GDP in the last quarter will be about 7.5%. At the same time, seasonally adjusted, the decline in output will slow to -2.5% compared to -3.4% in the third quarter, he adds. Weisberg predicts a 6% drop in GDP in the fourth quarter. The main factors are a new wave of consumer pessimism, a reduction in oil production, and a high base for agriculture last year. At the same time, according to him, the negative contribution of wholesale trade will decrease, since the comparison base for gas exports will be lower.

For the year as a whole, Weisberg predicts a decline in GDP by 2.8%, that is, “the forecast of the Ministry of Economic Development is quite justified.” According to Isakov, at the end of the year, the economy could fall by about 3.5%.