The EconMin confirmed its 2019 GDP growth forecast at 1.3% after yesterday’s Q2 flash estimate showing growth of 0.9% y/y. The print was slightly better than the 0.8% predicted by the ministry earlier, but H1 growth was 0.7% y/y, the same as the EconMin forecast. The ministry estimated the quarterly seasonally adjusted growth at 0.4% in Q2 after a decline of 0.2% in Q1, meaning that Russia averted the possibility for a technical recession.
Now the EconMin expects that GDP growth will accelerate to 1.6-1.8% y/y in H2’19, which would ensure the 1.3% annual result. The main drivers will be higher state spending due to the national projects and the positive effect from previous CBR rate cuts. We see downside risks to this forecast, given the delays in the implementation of national projects, the constraint on oil production due to the OPEC agreement, as well as the forecasts for a weaker grain harvest.