Russian economy review – December 2021

The increase in economic activity continued in the fourth quarter of 2021. In annual terms GDP growth in November was estimated at 5.2% y/y (after 4.8% y/y in October and 4.3% y/y in Q3 2021) and 4.7% y/y in January-November. The biggest contributors to the November acceleration were construction, where growth was supported by mortgages and a strong investment trend, and agriculture, where the harvest season shifted towards the end of the year due to weather conditions. The situation in agriculture continued to improve in November, with output growth of 12.9% y/y after 5.5% y/y in October.

Oil and gas condensate production in Russia in 2021 increased by 2.2% compared to 2020 to 524.05 million tons, according to the operational summary of the Fuel and Energy Central Dispatch Department. Average daily production is recorded at 10.52 million barrels. A correction for a leap year is taken into account.

Gas production in Russia in 2021 increased by 10% compared to 2020 to 762.3 billion cubic meters. An adjustment for a leap year is taken into account. Russia produced 69.03 billion cm of gas in December (an increase of 3.3% compared to the same month last year).

Industrial production in November 2021 accelerated compared to November 2019 by 5.9% (2.0% in October), rising to 7.0% y/y in November 2020 (7.4% y/y a month earlier). At the same time, industrial output is still estimated to be comfortably above the pre-pandemic level (+4.3% in November). Mineral extraction continues to make a significant positive contribution to industrial dynamics, with output exceeding the pre-pandemic level for the second month in a row (2.1% in November, 1.3% in October). Compared to November 2019 the increase was 2.2% (October: 1.3% compared to October 2019). By November 2020, mining output increased by 10.2% y/y (11.1% a month earlier).

The Russian manufacturing PMI fell to 51.6 points in December 2021 from 51.7 points a month earlier. In general, in the fourth quarter, we see a steady recovery in the manufacturing industry, while in the third quarter, production was steadily declining. The Russian manufacturing sector experienced relatively steady output growth and new orders by the end of 2021. At the same time, capacity pressures eased again while job creation slowed.

Russia's service sector PMI increased to 49.5 points in December from 47.1 points in November, indicating a slight contraction in service sector activity. In general, we see a reduction in the rate of decline in the service sector.

Unemployment in Russia remained at 4.3% in November 2021 (seasonally unadjusted) with 3.2 million people aged 15+ classified as unemployed according to the International Labor Organization's methodology. Of the 3.2 million unemployed, 1.0 million were rural residents and 2.2 million were urban residents.

In November 2021, the current account surplus of the Russian Federation continued to strengthen at a record level. According to a preliminary estimate of the Central Bank of Russia, in January-November 2021 it amounted to $111. 4 billion, having increased by 3.5 times compared to January-November 2020. Russia's exports in January-November 2021 amounted to $436.5 billion and increased by 44.4% compared to January-November 2020. Russia's imports during the same period amounted to $266.5 billion and increased by 27.2% compared to January-November 2020.

According to the Federal State Statistics Service, consumer inflation slowed to 0.82% m/m in December 2021 (November: 0.96% m/m), food inflation in December was 1.36% m/m (1.27% m/m in November). Non-food inflation in December was 0.64% m/m after 0.72% m/m in November (seasonally unadjusted: 0.64% m/m SA after 0.62% m/m SA a month earlier). The main contribution to the slowdown of both consumer price growth in general and monetary inflation in December was the normalization of the service sector (+0.26% m/m) after an unusual acceleration to 0.81% m/m in November due to foreign tourism services. Seasonally smoothed price growth also slowed in December (0.09% m/m SA after 1.11% m/m SA a month earlier).

On 17 December 2021, the Board of Directors of the Central Bank of Russia decided to increase the key rate by 100 basis points to 8.50% per annum. Inflation is above the October forecast of the Bank of Russia. The next meeting of the Board of Directors of the CBR, where the key rate level will be discussed, is scheduled for February 11, 2022.

High growth rates continued to be recorded in the corporate and mortgage segments, while unsecured consumer lending slowed significantly due to earlier cooling measures and higher borrowing costs.

As of December 1, 2021, the US dollar exchange rate was 74.89 rubles. As of December 31, the exchange rate was 74.29 rubles to the US dollar.

The Euro was 84.82 rubles as at December 1. At the end of the month the exchange rate amounted to 84.06 rubles per euro.

The total volume of trading on the Moscow Stock Exchange markets increased by 6.6% to 1.01 quadrillion rubles ($13.4 trillion) at the end of 2021. For the first time ever, the annual volume of transactions on the Moscow Exchange markets crossed the one quadrillion ruble mark.

The record volumes of trading by the end of 2021 are recorded on the stock market - 30 trillion rubles ($403.8 billion) (growth of 25.5% compared to 2020), futures market - 158 trillion rubles ($2.12 trillion) (growth of 21.7%) - and the money market - 474 trillion rubles ($4.38 trillion) (growth of 11.1%), 1%), as well as in the standardized derivatives market - 2.8 trillion rubles ($37.6 billion) (4.8 times growth) - and the precious metals market - 209.2 billion rubles ($2.81 billion) (four times growth).

The leaders of growth on the Moscow Stock Exchange in December were shares of Moscow Credit Bank PJSC +10.42%, United Company RUSAL +9.09%, MMK PJSC +9.02%, VTB PJSC +8.68%, Norilsk Nickel Group +8.49% and Rosneft PJSC +6.78%. The biggest declines were recorded by OZON -20.15%, Fix Price -13.5%, Petropavlovsk Group -9.71%, Yandex -8.01%, TCS Group -6.64%, PJSC Polyus 5.35%, X5 Retail Group -4.89% and PJSC Magnit -4.67%.

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