Russia’s Loan-Fueled Consumption Boosts GDP Growth to Fastest Since 2008
Russian domestic demand, fueled by consumer loans, propelled economic growth to the fastest rate in three years in the third quarter, Deputy Economy Minister Andrei Klepach said.
Gross domestic product grew 5.1 percent from a year earlier, the highest rate since the third quarter of 2008, compared with 3.4 percent in April-June, Klepach told reporters in Moscow late yesterday. That brought nine-month growth to 4.2 percent, or 0.1 percentage point faster than the government’s full-year forecast.
“The main factors behind the acceleration in GDP growth were household consumption and fixed investment growth, supported by more vibrant construction activity,” Yaroslav Lissovolik, head of research at Deutsche Bank in Moscow, in an e-mailed note today. “We expect growth in the final quarter to stay above 4 percent, which is likely to be supported by higher budget spending at the end of this year and the still-high growth in household consumption.”
Russia, the world’s largest energy exporter, is counting on domestic consumption to balance shrinking demand abroad as Europe, its most important market, fights to contain a debt crisis. Loan growth may reach 30 percent this year, Klepach said, above the central bank forecast of 24 percent, which is “a bit too fast,” First Deputy Chairman Alexei Ulyukayev said last week.
“We’re above forecast on retail sales, even though in September they usually slow,” Klepach said, adding the economic expansion may lose steam in the fourth quarter, slowing to between 3.8 percent and 3.9 percent.
Prime Minister Vladimir Putin, who will run for president in next year’s election, said on Oct. 6 that Russia would “do everything” to achieve faster growth of 6 percent to 7 percent annually. GDP expanded 4 percent in 2010 after a record 7.8 percent contraction the previous year. Russia posted an average growth rate of almost 7 percent from 1999 to 2008.
A reliance on raw materials, which President Dmitry Medvedev called “humiliating” and “primitive,” makes the economy vulnerable to dropping global demand for its commodity exports.
The ruble lost 0.2 percent to 30.5799 per dollar as of 10:36 a.m. in Moscow, declining for the first day since Oct. 20. The currency was 0.4 percent weaker at 42.5451 per euro, leaving it down 0.3 percent at 35.9642 against the central bank’s target dollar-euro basket.
Russia’s sovereign rating, which was last raised by Moody’s Investors Service in 2008, is exposed to sudden changes in the price of oil, Fitch Ratings and Standard & Poor’s said as they kept the credit grade unchanged last month and in August, respectively.
Industrial output stagnated last month after exports began to suffer, while retail sales rose at the fastest rate since October 2008. Production at factories, mines and utilities slowed to 0.7 percent growth in the third quarter from the previous three months, after rising 1.3 percent in April-June, Klepach said.
“There’s been a slowdown, and it’s because of export- oriented sectors and uncertainty on global markets,” he said. Industry may slow again in the fourth quarter, though it won’t contract, Klepach said.
The inflation rate this year may be less than the lower end of the government forecast range of between 6.5 percent and 7 percent, Klepach said. That would be the slowest since the fall of the Soviet Union two decades ago.