Russian economy review – November 2021

The increase in economic activity continued in the fourth quarter of 2021. In annual terms, GDP growth in October was estimated at 4.9% y-o-y (after 4.3% y-o-y in Q3 2021), while in January-October it was 4.6% y-o-y. The biggest contributors to the October acceleration were mining, where the recovery continues amid planned easing of OPEC+ restrictions and growth in gas production; and trade, which is connected, inter alia, with growth of gas exports amid rising global prices. In agriculture, the situation improved in October after declining in August-September, driven by a shift in the harvest campaign due to the current year's weather conditions.

Oil and gas condensate production in Russia in January-November 2021 increased by 1.6% compared to the same period in 2020 to 477.86 million tons. Average daily production was recorded at 10.49 million barrels. Russian oil exports to non-CIS countries in January-November 2021 totaled 195.11 million tons, a 3.5% drop on the same period in 2020. Average daily exports were recorded at 4.28 million barrels.

Gas production in Russia in January-November 2021 increased by 10.6% compared to the same period in 2020 to 692.76 billion cubic meters. Russia produced 66.1 billion cubic meters of gas in November (up 4.6% on the same month last year). Gazprom's exports to non-CIS countries increased to 171.5 billion cubic meters, an increase of 6.6% (10.6 billion cubic meters) compared to the same period in 2020.

The industrial production trend in October 2021 remained stable following September's acceleration. At the same time, industrial output is still estimated to be comfortably above the pre-pandemic level (+2.8% in October). Compared to October 2019, industrial output increased by 1.7% (3.3% in September), rising by 7.1% y/y to October 2020 (6.9% y/y a month earlier). Key non-resource sectors remain the driver of manufacturing output growth in October compared to 2019 levels: the chemical complex grew by 13.8% year-on-year in October 2019, the food complex by 4.8%, the machine building complex by 3.7% and the wood processing complex by 11.5%.

The PMI for manufacturing industries rose to 51.7 points in November 2021, compared to 51.6 points a month earlier. Electricity consumption in November 2021 for Russia as a whole was 98.5 billion kWh, an increase of 5.0% compared to 2020. At the same time, electricity generation in November 2021 amounted to 100.8 billion kWh, which is by 6.2% more than in November of the previous year.

The Russian service sector PMI declined to 47.1 points in November 2021 from 48.8 points in October. The decline was linked to weak demand and renewed restrictions due to COVID-19.

Unemployment in Russia remained at 4.3% in October 2021, the same as in September 2021, according to the Russian Statistics Service. According to statistics, the total number of unemployed in Russia was 3.3 million in October.

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. The determining factor in the trade balance dynamics was an increase in exports of goods due to a favourable pricing environment and a slight slowdown in the growth rate of imports.

Monthly inflation in November was 0.96% m/m after 1.11% m/m in October. The main inflationary pressure resulted from an unusual November price trend in the service sector (0.81% m/m) against a rising cost of overseas tourism services. At the same time, the growth rate of food (1.27% mom) and non-food prices (0.72% m/m) decreased.

The annual inflation rate is likely to be at the upper end of the central bank's forecast and the regulator will consider a wide range of steps at the next meeting. The Bank of Russia will consider decisions on the key rate in December with a range from keeping it at 7.5% p.a. to increasing it by 1 percentage point, but keeping it is the most unlikely option.

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.

The dollar exchange rate as of November 1, 2021 was 70.52 rubles. On November 31, the exchange rate was 74.98 rubles per dollar.

Euro exchange rate on November 1 was 82.28 rubles. At the end of the month the exchange rate amounted to 84.48 rubles per euro.

The total volume of trading on the Moscow Exchange markets in November 2021 grew by 11.7% to 91.0 trillion rubles ($1.23 trillion) (81.4 trillion rubles ($1.1 trillion) in November 2020).

The best performing markets were the derivatives market (up 44.1%), equity market (up 29.1%) and money market (up 19.2%). The volume of transactions on the standardised derivatives market increased by 9.6 times and on the precious metals market by 2.5 times.

Leaders of growth on the Moscow Exchange in October were shares of PJSC "Surgutneftegaz" +14.87% and GK "PIK" +0.82%. VK Group -27.57%, TCS Group -20.27%, Sistema -16.69%, Yandex -16.64, Sberbank -15.66%, X5 Retail Group -14.23%, Ozon -13.95% and Magnit - 12.69% showed the largest drop.

RAUIE provides comprehensive support for foreign businesses operating on the Russian market, including legal, migration and accounting support, business development, export-import and investment projects. It is easy to get assistance: all you need to do is to leave an application on the website or by post to business1@raspp.ru. Our specialists will help you.