Russian economy shrinks 0.4% in first half but capital investment increases
MOSCOW (Reuters) – Russia’s economy shrank 0.4% in the first six months of 2022 from a year ago, but capital investment, a key driver of economic growth, rose 7.8%, according to data from the Federal Statistics Service Rosstat released on Wednesday.
The export-dependent economy is plunging into recession, hit by sweeping Western sanctions for what Moscow calls “a special military operation” in Ukraine. But the depth of the contraction has so far not been as great as initially thought.
In 2022, the economy will contract by less than 3%, a senior government official said this week. His call contrasts with the economy ministry’s earlier assumption which warned of a drop of more than 12% – which would have been the biggest fall in economic output since the crisis of the mid-1990s following the the collapse of the Soviet Union.
In the second quarter alone, capital investment rose 4.1% year-on-year after a 12.8% increase in the first quarter, according to Rosstat data, with mining and manufacturing accounting for most of the increase in the first half of the year. .
The Rosstat data contradicts the expectations of many economists who predicted Russia’s economy would collapse this year under the weight of unprecedented Western sanctions, which had frozen about half of Russia’s gold and currency reserves.
With higher prices for its oil exports cushioning the impact of Western sanctions, the economy has avoided collapse six months after Moscow sent its forces to Ukraine. But difficulties arise for some Russians.
Official unemployment stood at a record high of 3.9% in July, Rosstat data showed on Wednesday, but real wages, which are adjusted for inflation, fell 3.2% year on year. annually in June.
The data also showed that retail sales, the indicator of consumer demand, fell 8.8% in July year-on-year after falling 9.6% the previous month.
Russian consumer prices extended their decline for the eighth consecutive week, according to data from Rosstat, after prices of almost everything jumped sharply in the aftermath of February 24.
The drop in the consumer price index could open the door to further rate cuts by the central bank needed to help the economy.
(Reporting by Andrey Ostroukh; Editing by Emelia Sithole-Matarise and Jonathan Oatis)
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