Russian economy likely to grow 1.9 pct in 2017, 2 pct in 2018 – Danske Bank

The Russian economy continues to expand. In the second quarter of this year, the economy had expanded 2.5 percent year-on-year as compared to 0.5 percent year-on-year a quarter earlier. The final data showed that the economic growth slowed to 1.8 percent year-on-year in the third quarter. Agriculture and service sectors mostly contributed to the economic growth, while rebounding retail sales also supported the economic growth.

“We keep our 2017 GDP growth estimate at 1.9 percent y/y and at 2.0 percent y/y for 2018. We expect the economy to grow 2.1 percent in 2019”, stated Danske Bank in a research report.

The presidential election in March 2018 is expected to be a non-even for the markets. But some reforms might be started as the election is over and the new government is formed before the second half of 2018. The pension age increase is likely to start in 2019, while taxes should remain unchanged through 2018.

“Given the expectations of possible reforms in Russia, it could push up potential growth in the long term from current 2.0 percent y/y”, noted Danske Bank.

The rigid fiscal discipline in Russia is set to continue through the next presidential term 2018-2024. The budget deficit is nearing 0 percent of GDP in early 2020s already. The current account surplus is expected to continue through the next years, added Danske Bank.

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