The Russian economy grew 4.3% y/y during the third quarter, but the post-coronavirus recovery is almost over. The result was close to Sova Capital’s expectation (+4.2% year on year) but below Bloomberg consensus (+4.5% y/y), according to RosStat’s preliminary GDP growth estimate for 3Q21 released on November 17.  

“The solid 3Q21 figures were likely due to the still strong but waning momentum in retail and wholesale trade, manufacturing, and freight and passenger turnover,” Sova Capital said in a note.

At the same time, mining and quarrying along with the financial sector likely did better than in 2Q21, Sova Capital reports.

“On our estimates, the economy added just 0.15% SA quarter on quarter in 3Q21 after adding 2.1% SA q/q in 2Q21. The non-working period and partial lockdowns should lead to lower GDP growth in 4Q21 than previously expected, and our forecast is for growth of 1.7% y/y. Our outlook for Russia’s FY21 growth is 3.8%, which is lower than the estimates from CBR (+4-4.5% y/y) and Russia’s Ministry of Economic Development (+4.2% y/y),” the bank said in a note.

During the previous quarter, the economy grew 4.3% y/y, which is close to Sova’s forecast (+4.2% y/y) but below Bloomberg consensus (+4.5% y/y). The estimate is based on the production approach, which uses data from large and mid-sized enterprises in the non-financial sector.

According to RosStat, which disclosed no additional details, its 3Q21 GDP estimate was largely influenced by the sustained recoveries in retail (+5.3% y/y) and wholesale trade (+6.7% y/y), construction (+5% y/y) and manufacturing (+3.7% y/y), as well as in freight turnover (+6.8% y/y) and passenger turnover (+49% y/y).

Compared to 2Q21, most indicators saw their growth rates halve in 3Q21 vs. 2Q21, while the growth rates for retail and wholesale trade were four times lower.

“In our view, the main exceptions were mining and quarrying (+9.4% y/y), where the recovery in volumes has accelerated thanks to OPEC+ easing restrictions; and the financial sector, the growth in which came amid higher rates, although these were not enough to compensate for higher inflation and still buoyant demand for mortgages after the revision of the subsidized programmes,” Sova Capital reports.

“Russia’s economic recovery nearly stopped in 3Q21 after surpassing 4Q19 levels in 2Q21 (+0.15% SA q/q in 3Q21 vs. +2.1% SA q/q in 2Q21, on our estimates). The non-working period and partial lockdowns should cool Russia’s 4Q21 outlook, and we expect the country’s GDP growth to slow to 1.7% y/y in 4Q21 due to these restrictions. On our estimates, the 11-day partial lockdown in Moscow, the Moscow Region, St. Petersburg and other regions could cost Russia more than 0.3% of its FY21 GDP growth. As a result, we expect Russia’s FY21 GDP growth to be 3.8% y/y,” the bank added.