Russian Economy Probably Accelerated to End Six-Quarter Slowdown

Russia’s economic growth probably accelerated for the first time in seven quarters, halting the worst slowdown the nation has endured since a 2009 recession.

Gross domestic product expanded 1.4 percent in the third quarter from a year earlier after a 1.2 percent increase in the previous three months, according to the median estimate of 19 economists in a Bloomberg survey. The Economy Ministry forecasts a 1.2 percent advance. The Federal Statistics Service in Moscow will publish the data today or tomorrow.

The investment-led growth model laid out by President Vladimir Putin after he took office for a third term last year hasn’t materialized, with weaker domestic demand hurting profits at companies including OAO AvtoVAZ. A modest recovery last quarter would bolster the central bank’s decision to focus on taming inflation at the expense of stimulating output after an unexpected pickup in consumer-price growth last month.

“I’m not expecting any significant acceleration because all of the data for the third quarter have been weak,” Artem Arkhipov, chief economist for Russia at ZAO UniCredit Bank in Moscow, said by e-mail yesterday. “I’m becoming a skeptic on the chances for a change in rates this year. October inflation dealt a sharp and unexpected surprise.”

Weaker prospects for Russian growth have curbed appetite for the country’s equities. The dollar-denominated RTS Index (RTSI$) of 50 stocks has fallen 6.2 percent this year compared with a 24 percent advance in the Standard & Poor’s 500 Index.

Rates Held

The central bank left interest rates unchanged last week for a 14th month after consumer prices rose 6.3 percent in October from a year earlier. Policy makers led by Chairman Elvira Nabiullina dropped a forecast that the inflation rate would fall into this year’s target range of 5 percent to 6 percent by year-end and warned that the pace of economic growth would remain “low” in the medium term.

New sales of cars and light vehicles fell in October for an eighth month, declining 8 percent from a year earlier, the Association of European Businesses in Russia said in an e-mailed statement yesterday. The drop at AvtoVAZ, Russia’s biggest carmaker, reached 25 percent, the group said.

Russia, where growth averaged 7 percent during Putin’s first two terms as president in 2000-2008, will see its share of global GDP eroded over the next two decades as the economy expands more slowly than the world average, Economy Minister Alexei Ulyukayev told reporters in Moscow last week.

The government now projects an average growth rate of 2.5 percent a year to 2030 compared with 3.4 percent to 3.5 percent globally, he said.

Putin’s Agenda

Putin’s goals for economic growth included increasing investment to 25 percent of GDP by 2015 and raising labor productivity 50 percent from 2011 levels by 2018, according to orders published hours after his inauguration on May 7, 2012.

Economic growth has slowed every quarter since the last three months of 2011, when GDP expanded 5.1 percent, according to data compiled by Bloomberg. Economists projected the pace would accelerate to 3 percent as recently as July, according to a Bloomberg survey.

“We believe that the period of stagnation is about to end,” Alexey Devyatov, chief economist at UralSib in Moscow, said yesterday in an e-mailed report. “In the short term, the improvement in Europe will continue to support the Russian economy via foreign trade.”

Trade Surplus

The trade surplus expanded 9.3 percent in September from a year earlier, following gains of 31 percent and 24 percent the previous two months, according to Federal Customs Service data.

That has supported the ruble, which strengthened 1.4 percent against the dollar in the third quarter, according to data compiled by Bloomberg. That made it the seventh-best performer among 24 emerging-market currencies tracked by Bloomberg.

“The economy is weak, and it’s not a surprise,” Vladimir Osakovskiy, chief economist for Russia at Bank of America Merill Lynch, said yesterday by phone from London. “I don’t think it will have an impact on the rates outlook simply because the central bank remains focused on inflationary dynamics and that actually disappointed quite a bit in October.”

To contact the reporter on this story: Scott Rose in Moscow at

To contact the editor responsible for this story: Balazs Penz at

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