Briquetted iron sits in freight wagons outside the Cherepovets Steel Mill, operated by Severstal PJSC, in Cherepovets, Russia (Photographer: Andrey Rudakov/Bloomberg)

Russian Recovery Sputters as Economy Continues Slog After Crisis

(Bloomberg) -- Russia’s economy remained near stagnation for a second quarter after exiting its longest recession this century.

Gross domestic product rose 0.5 percent from a year earlier in January-March after an increase of 0.3 percent in the previous three months, the Federal Statistics Service said Wednesday, citing preliminary data. The median of 16 estimates in a Bloomberg survey was for a gain of 0.4 percent.

After showing resilience to the worst of the crash in commodities markets last year, when GDP shrank only 0.2 percent, the economy of the world’s biggest energy exporter is proving equally immune to a pickup in oil. The price of Russia’s Urals crude averaged almost 63 percent more last quarter than during the same period of 2016, according to the Finance Ministry.

“Such low sensitivity should also prevent real GDP trends from overreacting to a recovery in oil prices,” Vladimir Osakovskiy, chief economist for Russia at Bank of America Corp. in Moscow, said in a report. “The strong recovery of oil prices between the first and fourth quarters of 2016 managed to push the economy to only slightly above zero percent.”

The sluggish rebound contrasts with Russia’s torrid return to growth following its previous two recessions. Despite gains in the ruble, the economy is still near a standstill as investment and consumer spending fail to take off. The Russian currency has appreciated almost 8 percent against the dollar this year.

GDP, which contracted for seven quarters before growing in the last three months of 2016, may expand as much as 1.5 percent this year, according to the central bank’s baseline scenario, which assumes oil at $50 a barrel.

“Growth in investment demand and a continuing rebuilding of inventories have made a positive contribution to GDP,” said Oleg Kouzmin, chief economist for Russia at Renaissance Capital in Moscow. “Starting from the second quarter, we expect a recovery also of the annual growth pace in consumer demand.”