Russian economy forecast: Stabilization and modest recovery - Wells Fargo

According to analysts from Wells Fargo, there are good prospects for a recovery in the Russian economy but far from “boom” growth rates.

Key Quotes:

“Recently released data showed that real GDP in Russia declined 3.8 percent from a year ago in Q4 2015. Not only did that mark a less sharp contraction than the consensus was expecting, but the Q3 figure was revised to show a less steep decline as well.”

“There are some factors in the pipeline that should lead to stabilization and then a recovery in Russian economic output in coming quarters.

“Looking to the immediate future, we forecast that the Russian economy will contract a more modest 0.5 percent this year before growing 2 percent or so next year.”

“The Russian economy contracted sharply last year, hampered by a combination of low prices for its energy exports, high inflation and Western sanctions. However, the seeds of eventual recovery in Russia appear to have been sown.”

“The collapse in the value of the ruble is shoring up exports, while inflation appears to be receding, which should support real wage growth and may afford the CBRF scope to gradually reduce its main policy rate in the coming quarters. That said, any recovery is likely to be gradual, with energy prices set to remain low for quite some time and Western sanctions further weighing on the country’s prospects. Moreover, with the country’s working-age population on track to decline further in the coming decades, a return to the “boom” years seems unlikely any time soon.”