Macroeconomic environment in 2019
In 2019, the world GDP growth slowed down to 2.9% against 3.6% in 2018: advanced economies grew by 1.7% compared with 2.3% in 2018, and emerging markets and developing economies (EMDEs) grew by 3.9% compared with 4.5% in 2018. The main factors of the slow-down included the trading tensions between the United States and China and stagnation in the main European economies. The price of Brent crude oil averaged to US$ 64 per barrel in 2019, US$ 7 per barrel lower than its 2018 average (US$ 71).
The Russian GDPgrew by 1.3% yoy in 2019 (2.5% yoy in 2018). The main factors of this moderate growth were decrease in exports (-2.3% yoy compared with 5.5% yoy in 2018) and lower final consumption expenditure (2.4% yoy compared with 2.8% yoy in 2018), including household consumption (2.5% yoy compared with 3.3% yoy in 2018). Increased imports (+3.4% yoy compared with 2.6% yoy in 2018), gross capital formation (1.5% yoy compared with 0.2% yoy in 2018) and public spending (+2.2% yoy compared with 1.3% yoy in 2018), supported by the launch of the National projects, did not provide enough to ensure higher growth.
The industrial production grew by 2.4%, which is 0.5% less than in 2018 (2.9%). The highest growth was observed in basic pharmaceutical products and preparations (+19.6% yoy), fabricated metal products (+8.9% yoy), computers, electronic and optical products (+8.0% yoy), furniture (+6.8% yoy), wood and products of wood and cork (+5.3% yoy). Machinery and equipment declined (-2.4% yoy), while the most significant decline was in the segment of transport equipment (-12.1% yoy).
In 2019, consumer inflation in Russia (the Consumer Price Index) remained low (3.0%). The unemployment rate reached 4.6% at the end of the year, being one of the lowest in the history of the country.
Industrial Producers Price Index declined by 4.3% in 2019. The Central Bank of Russia decreased the key rate 5 times in 2019 (from 7.75% to 6.25%) to support the economic activity on the back of low inflation, which made the loans more available for both business and households.
As a result, the total corporate debt reached Rub 41.9 trillion (+5% yoy) at the end of 2019, while loans to individuals grew up even faster, to the level of Rub 19.1 trillion (+19% yoy), so that the Central Bank of Russia took control measures to limit the credits to individuals with high credit-risk profiles.
Despite the continued sanctions of the United States and the European Union the Russian ruble remained stable in 2019: it declined by 3% against the US Dollar (average USD/RUB: from 62.6 to 64.8) and grew by 2% against the Euro (average EUR/RUB from 74.1 to 72.4).
The year 2019 was marked by the beginning of the pension reform in Russia, which will result in the retirement age increase by 5 years for both men (increase from 60 to 65 years) and women (increase from 55 to 60 years). The reform will eventually increase the country’s available labor force in the face of the ageing population.
Starting from January 1, 2019, the Value Added Tax in Russia increased from 18% to 20%, which will bring additional revenue into the Russian budget.
The current account surplus was at the level of US$ 64.6 billion for 2019 (lower than US$ 113.7 billion in 2018). Commodities Exports amounted to US$ 417.9 billion, with US$ 121.6 billion coming from crude oil, US$ 66.3 billion – from oil products, US$ 41.5 billion – from gas, US$ 8.4 billion – from LNG (total sum of oil and gas exports, including oil products reached US$ 237.8 billion). Commodities Imports reached Rub 254.8 billion. Direct investments amounted to US$ 26.9 billion, a significant increase compared to US$ 5.9 billion in 2018. Exports of services reached US$ 63.6 billion, while Imports of services amounted to US$ 98.3 billion.
The Russian Budget showed a surplusof Rub 1.9 trillion, equal to 1.8% of the GDP. Budget revenue increased by 3.8%, while spending grew by 9.0%. Total external debt of Russia (both government and corporate) increased by 9.9%, to the level of US$ 500 billion.
As the result of favorable economic conditions, the MOEX Russia Index increased from 2,369 points at the end of 2018 to 3,046 points at the end of 2019 (+29%), with a total capitalization of Rub 11.8 trillion. The RTS Index growth was even higher, from 1,069 points to 1,549 points (+45%) during 2019, with a total capitalisation of US$ 190.4 billion.