Russian Economic Recovery under Way in April Despite Sanctions

Retail sales in Russia picked up in April, while real wages growth exceeded expectations as the unemployment rate fell, suggesting an economic recovery was under way.

The monthly set of data released by the Federal Statistics Service, or Rosstat, indicated that sanctions that the United States imposed on Moscow in early April had little immediate impact on Russia’s fundamentals.

After two years of recession caused by a slump in oil prices and Western sanctions, the Russian economy is now recovering along with oil, the rouble has generally stabilized and global commodity prices remain favorable for an economy dependent on exports of energy and raw materials.

Retail sales, the key gauge for consumer demand, the primary driver of economic growth, were up 2.4 percent year-on-year in April after a 2.0 percent rise in the year to March.

Capital investment, the next most important driver, was up 3.6 percent year-on-year in the first quarter after increasing 1.4 percent in the same period a year earlier.

“The latest Russian activity figures suggest that GDP growth picked up to about 1.5 percent year-on-year at the start of the second quarter,” the research firm Capital Economics said in a note.

“These data also provide early evidence that the tightening of U.S. sanctions and the fall in the ruble in early April have had little impact on the real economy so far.”

Kirill Tremasov, a former head of macroeconomic forecasting department at the Economy Ministry, said on his Telegram channel that Tuesday’s set of data suggested annual GDP growth stood at 1.5 percent in April.

This year, the economy is projected to expand by 1.5-2.0 percent, according to the central bank’s forecasts, after growing by 1.5 percent in 2017.

Real wages, which are adjusted for inflation, rose 7.8 percent year-on-year in April, beating analysts’ call for a 5.9 percent increase.

At the same time, the unemployment rate inched lower to 4.9 percent in April, its lowest since August 2017, from 5.0 percent in March.