According to preliminary estimates, real GDP expanded by +1.5% in 2017, a moderate recovery from two years of annual contraction (2016: -0.2%; 2015: -2.8%). The breakdown of GDP indicates that consumer spending grew by +3.4% and fixed investment by +3.6%, supported by low inflation and a strengthened currency (the RUB gained an average +13% against the USD in 2017). Moreover, stocks added +1pp to 2017 growth. However, government consumption continued to decline by -0.9%. Real export growth gained momentum last year, thanks to higher commodity prices and the improved global environment, increasing by +5.4%. However, the recovery of domestic demand boosted real import growth to +17% so that net exports subtracted -1.9pp from overall growth in 2017. Looking ahead, we expect the gradual recovery to continue in 2018, benefiting from monetary policy easing, robust consumer spending and higher oil prices. However, the output cut deal with OPEC will restrain oil production and exports to some extent. We forecast real GDP growth of +1.9% this year, but potential new sanctions pose some downside risk to this outlook.
