Russia: Fading growth ahead – Danske Bank

Analysts at Danske Bank point out that the Russian economy grew 1.5% y/y in Q3 18 versus 1.9% y/y a quarter earlier as industrial production growth has remained in positive territory through 2018, and manufacturing PMI has recovered staying over 50.0.

Key Quotes

“We stick to our GDP growth estimates of 1.6% for 2018, 1.3% for 2019 and 1.4% for 2020, emphasising once more that a continuing tight monetary policy and geopolitical woes remain the major downside risk for our macro forecasts.”

“The looming pension reform, VAT and fuel price increases in early 2019 would hit Russian consumers, especially in Russian provinces, where monthly salaries are much lower than in cities with more than one million inhabitants.”

“Possible US sanctions on the banking sector would add to volatility in Russian markets in 2019. Yet, as some banks have billions of USD of external obligations, that could limit the level of toughness of the looming sanctions.”