Russian economy: we're preparing for the worst, but hoping for the best

According to the Minister of Economic Development Aleksei Ulyukaev Russian economy could show a little bit better result by the end of the year, than for all last months, when the economic performances were just worsening. In light of the fact that industrial production has declined (for the first time since the beginning of the year) by 0,1% in January-November, the statement of the Minister looks very optimistic in this context.

GDP (Gross domestic product) has increased by 1,4% for 10 months of the current year, and in October – by 1,8%. Most probably it wouldn't succeed to reach the planned performance by 1,8% at year-end anymore and the domestic product would show positive dynamics by 1,5%. Now therefore, some recovery of the economy is expected in October-December, though weak, but at least. There are some reasons for it.

First of all, pleasant situation in the agricultural sector: after rains at the beginning of autumn, which hindered harvesting operations, agricultural industry showed double-digit growth in October - 26,3% on an annualized basis, that in itself is an excellent result.

Moreover, it is observed the improvement of investment demand in last months of the year, in which the investment program of Gazprom has no small share.

On top of that, it is observed the retail trade recovery: in October the turnover growth was speeded up to 3,5% on an annualized basis against 3% in September. And in view of coming traditional Pre-New Year clearance sales, the analysts of the Agency Credinform forecast if not bigger, but surely attained level of dynamics in the retail field.

All mentioned positive signals will help domestic economy to finish the year on an up note, but they are short-term. It must be stated, that general position of affairs is not so bright.

First of all, the decline of capital investments is speeding up – in October it was -1,9% on an annualized basis, while in September the figure was -1,6%.

The unemployment is continuing to rise, in October it reached 5,5%. In view of the decrease in industrial production this fact is not surprising.

And, perhaps, the main determinant, which could play a low-down trick with us in the long-term outlook, is the growth of bank crediting of natural persons, that reached on an annualized basis 30% in October. Surely, loan proceeds can spur the consumption now, but along with this the risk of loan default grows up, that will have an impact on the banking sector in some or other way. On the back of economic stagnation, similar practice of credit institutions seems to be highly risky.