According to preliminary estimates by Rosstat, GDP growth accelerated to a six-year high of +2.3% in 2018 (from +1.6% in 2017). The figure surprised markets and raised doubts about Russian economic data among analysts as the average GDP increase in Q1-Q3 2018 had been reported at +1.6% y/y previously and Q4 was the weakest quarter in 2018 with regard to growth of industrial production (+2.7% y/y) and retail sales (+2.4%). Rosstat explained the surprise figure with a sharp upward revision of construction output growth from +0.5% y/y for the first 11 months of 2018 to +5.3% for the full year after receiving last-minute data from a large LNG project in north Siberia. On the demand side, the 2018 growth acceleration was driven by a better external sector. Exports rose +6.3% (+5% in 2017) thanks to higher oil output while import expansion dropped to +3.8% (+17.4% in 2017) impacted by the RUB depreciation. Meanwhile, domestic demand softened as a result of faltering consumer sentiment (hike in retirement age, VAT increase), fiscal consolidation and new sanctions. Looking ahead, the fall in the Manufacturing PMI to 50.9 in January (from 51.7) and higher inflation expectations due to the VAT hike point to a weak start to the year. We forecast real GDP growth of +1.5% in full-year 2019.
