GDP grew by 0.5% y/y in Q1’19 according to the supply-side breakdown published by Rosstat on Tuesday, which confirmed the result in the earlier announced flash estimate. Nominal GDP during the quarter reached RUB24.49 trillion, rising by 9.1% y/y, but the weakening of the ruble reduced the dollar-based GDP to USD370bn, down 6.1% y/y.
Looking at the breakdown, the sharp slowdown compared to the 2.3% y/y growth in Q4’18 is due to a number of sectors. Trade had the largest contribution, which is primarily due to wholesale trade, while retail trade performed much better. This can be linked to the VAT hike in our view as large traders increased stocks ahead of the VAT hike. Construction also had a large negative contribution as the strong 4.9% y/y growth in Q4 turned to zero in Q1. Next in the list come real estate services and extraction, although the latter remains among the best performing sectors as growth eased to 4.6% y/y from 7.7% y/y. Only a couple of sectors improved performance, most notably manufacturing industry where growth strengthened to 0.6% y/y from 0.2% y/y. Overall, the figures are not a big surprise and we expect that the demand side breakdown will indicate that the slowdown was primarily due to lower investment demand and inventories.