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Russian economic growth accelerated to 1.7% in the third quarter, the fastest pace this year, after the central bank slashed borrowing costs in four consecutive rate cuts.
The latest growth number, a preliminary reading, is a sharp acceleration from 0.9% in the second quarter and matched the median estimate in a Bloomberg survey.
“Industrial production, mining and extraction, and wholesale trade, especially in natural gas, supported growth in the third quarter,” Pavel Malkov, the head of the agency, said at a press briefing in Moscow.
Monetary easing has helped to support consumer demand that was battered by half a decade of shrinking incomes. But economists say further economic growth will be limited without fiscal stimulus. A multi-year infrastructure spending project has so far been slow to get off the ground, but could be a bigger contributor to the economy next year.
“Growth is rebounding, but beneath the headline data demand remains weak,” said Scott Johnson, an economist at Bloomberg Economics. “The economy needs stimulus to keep the recovery going, and fortunately there’s more on the way.”
The Economy Ministry said in a report published Wednesday that budget stimulus may only give a temporary boost to growth.
Key Insights
- Years of tight monetary and fiscal policy have buffered the Russian economy against sanctions and oil price risks at the expense of growth. The budget surplus reached 3.8% of gross-domestic product, or 3 trillion rubles, in the first nine months of the year, the widest since before the global financial crisis in 2008.
- The central bank is considering more rate reductions after inflation dropped well below a 4% target. The benchmark rate was cut to 6.5% last month, down from 7.75% at the beginning of the year.
- The ruble has strengthened more than 8% against the dollar this year, helping bring down the cost of imports and limiting inflation.
- The economy expanded 1.1% in January-September of this year, the statistics agency said. The rate of growth in the fourth quarter will most likely be similar to the third quarer, the Economy Ministry said Wednesday, maintained its full-year growth estimate of 1.3%.