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Demand is positive in January, while output declines

28 February 2020

Production in Russia’s economy slightly slowed down in January 2020, while demand demonstrated positive dynamics. These are the findings published in the latest issue of ‘Economy: Facts, Assessments and Comments’.

Decreases in freight turnover and the output of the mining and electric power sectors were the major drags on the annual growth of production activity. The unusually warm January in Europe caused a decline in external demand for energy commodities (gas and coal) and internal power consumption in Russia. High gas inventories in Europe remained an additional factor of the downward trend in gas production. Coal output declined due to lower demand in China amid the coronavirus outbreak. As a result, railway transportation, including exports of coal, ferrous metals and grain, as well as pipeline transportation substantially shrank in January. In addition, businesses’ expectations remained moderate.

Conversely, investment and consumer demand expanded. Companies’ demand for labour and real wages both increased. Consumer sentiment stayed high. According to an inFOM survey, respondents were much more optimistic about Russia’s economic prospects.

The Bank of Russia estimates that the increase in domestic demand and the acceleration of budget spending will drive economic activity, which will result in 1.5–2.0% GDP growth in 2020. However, there is a significant risk to the forecast, that is, weaker external demand amid a possible slowdown in the global economy, including due to the coronavirus spread.

Preview photo: Rawpixel / Shutterstock / Fotodom