The main source of growth of the Russian economy in the second quarter of 2019 was consumer demand, estimates the Central Bank of the Russian Federation in the information and analytical commentary “Economics”. “According to a preliminary estimate by Rosstat, in Q2 2019, the annual GDP growth rate increased to 0.9%. This corresponds to the forecasted range of the Bank of Russia of 0.5-1%. According to estimates, consumer demand remained the main source of growth. At the same time, the increase in growth GDP was due to a smaller reduction in GFCF (gross fixed capital formation) compared to the previous quarter.
In this regard, the regulator notes an improvement in investment activity after a significant decline in the first quarter. The Bank of Russia in its press release after the July meeting of the board of directors at the rate noted that the growth rate of the Russian economy is below expectations of the Central Bank. In mid-June, he forecast the country's GDP growth in 2019 to 1-1.5% from 1.2-1.7%.
The Minister of Economic Development Mr Oreshkin in early June said that the imbalance in the consumer lending segment in Russia carries risks for the economy, and if nothing is done, the country may enter into a recession by 2021. The head of the Central Bank, Elvira Nabiullina, in turn, said that there is no “bubble” in the consumer lending market, and accordingly there are no risks of financial stability in the Russian Federation, however, the regulator takes preventive measures to cool this market.
Later, the Central Bank, citing data from a survey of banks, admitted that the expansion of consumer lending is due to already-borrowed groups of the population, and announced the introduction of additional measures to limit the debt burden from October 1.
The review also says that the Central Bank expects an increase in government investment in the third quarter and accelerate the growth of the Russian economy through the implementation of national projects.
“According to the forecast of the Bank of Russia, the implementation of national projects and an increase in government investment will increase the growth rate of gross fixed capital formation (GFCF) in Q3 to 0.5-1%, while the GDP growth rate will be 0.8-1.3%”, the authors of the document write. In Q2 GFCF on an annualized basis decreased by 0.5-1.0% according to Central Bank estimates.
“A smaller decrease compared to the previous quarter may be caused by the dynamics of those components of GFCF that are not included in the calculation of the indicator of investments in fixed assets. It is investments in these non-financial assets that decreased noticeably in Q1 2019. In Q2 2019, the restraining effect of the dynamics of these components by the growth of GFCF is estimated to have decreased”, the comment says. Investments in fixed assets of the Russian Federation in the second quarter increased by 0.6-0.7%, the Central Bank estimates.