Russia Monthly Economic Developments

  • Global growth remained broadly stable in the fourth quarter of 2016. 
  • After a volatile fourth quarter, oil prices fluctuated within a remarkably tight band of $53-55/bbl in early 2017.
  • Portfolio flows into emerging market funds and bond issuance activity have picked up since the start of the year, contrasting with a subdued performance in late 2016. 
  • Global financial flows, higher oil prices, and expectations of lower geopolitical pressures contributed to the ruble’s appreciation in January. 
  • Russian GDP contracted less than expected in 2016. 
  • While consumer demand remained depressed on the back of a protracted fall in real incomes, investment demand picked up on inventory restocking. Net exports were the main driver for economic growth.
  • Inflation slowed down in January with the 12-month consumer price index dropping to 5 percent from 5.4 percent in December. 
  • In 2016, the federal budget primary deficit worsened compared to 2015 due to an overall drop in revenue and increased expenditures.
  • In February 2017, the Central Bank, on behalf of the Ministry of Finance, started currency operations in the domestic market. These operations largely comply with the fiscal rule, which the Ministry of Finance plans to implement in 2020 and which aims to link the exchange rate with the cut-off oil price. 
  • The banking sector has mainly stabilized as key credit risk and performance indicators remained largely unchanged in the fourth quarter of 2016. 
  • Consolidation in the banking sector continues: the number of banks in Russia has fallen from 623 at the beginning of 2017 to 619 as of February 1, 2017. 
  • Overall, the Russian economy has coped well with the dual shocks of lower oil prices and restricted access to the international financial markets, heading towards moderate growth in 2017.


Apurva Sanghi

Lead Economist for the Russian Federation

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Marina Vasilieva
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