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29 Jul, 2021 11:11

Russia’s economic recovery reaches pre-pandemic level with higher-than-expected growth of 4.6%

Russia’s economic recovery reaches pre-pandemic level with higher-than-expected growth of 4.6%

Russia’s gross domestic product (GDP) increased by 4.6% year-on-year in the first half of 2021, exceeding expectations, the Economy Ministry has announced.

According to the ministry, in June the country’s GDP reached the pre-pandemic level corresponding to the fourth quarter of 2019, growing by 8.5% in annual terms. In the second quarter of 2021, GDP growth amounted to 10.1% compared to the same period in 2020 and 1.5% growth compared to the second quarter of 2019.

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The country’s GDP is mostly driven by non-energy sectors, including the agriculture, manufacturing, and construction industries. Domestic demand remained the main driver of the economy in 2021, the ministry stated. It also revealed that the average incomes of the population at the end of the second quarter this year were close to the level of the same quarter of 2019.

The ministry noted that, from April 2021, the annual dynamics of the main macroeconomic indicators were influenced by the low base of the corresponding months of 2020, when Covid-19 quarantine restrictions were at their peak. With this in mind, the ministry is basing calculations of the annual dynamics of economic recovery on the fourth quarter of 2019, which was unaffected by the pandemic.

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Last month, the ministry raised its outlook for Russia’s total GDP in 2021 to 3.8%, instead of the previously expected 2.9%. The forecast GDP growth will be the fastest that Russia’s economy has seen since 2012, as the average annual growth in 2014-2019 was less than 0.5%, with a dramatic 3% decline in 2020.

But the actual size of the Russian economy is likely far bigger than official statistics indicate. The numbers don’t take into account the country’s considerable black and gray economies. Many businesses in the country continue to pay workers, as well as buy goods and supplies, in cash. One Swedish-backed study estimated the off-the-books share of the Russian economy at a whopping 45% in 2018. This number would make Russia Europe’s largest real economy, in terms of purchasing parity.

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