Do Russia’s Q2 GDP Figures Show Light at the End of the Tunnel?

When is a fall of 10.9% in GDP year-on-year good news? Perhaps when it represents a growth of 7.5% on the previous quarter.

The Russian economy has had a rough year, but information released on August 11 by Russia’s state statistics agency indicates that things may be levelling off.

According to the second quarter data, Russia’s GDP fell by 10.9% year-on-year but grew by 7.5% compared to Q1 09. But while the figures are giving rises to some cautious optimism, the emphasis is definitely on the word “cautious.” Yulia Tseplayeva, Chief Economist at Bank of America-Merrill Lynch in Russia, told The New York Times that “it is very likely that Russia has bottomed out and that recovery has started.” But at the end of June, the Russian government downgraded its overall GDP forecast for the year to predict an 8.5% decline, and unemployment and wage arrears remain major issues.

The situation in the markets is also putting a damper on ideas of recovery. The Central Bank has been forced to intervene in currency markets to help bolster the ruble, and the debate about possible devaluation has revived. And in June the MICEX Index slipped into bear territory.

Nevertheless, the 7.5% GDP increase from the first quarter is certainly a positive sign, and things will look even brighter if the Q3 figures show a similar trend.

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