Lukashenko says he may quit as president
Belarus hits EU with tit-for-tat sanctions
Belarusian police introduce colour-coded torture system for detained protesters
Kremlin publicly condemns Belarusian police brutality in hint of growing frustration with Lukashenko
Russian services PMI rises to 48.2, but remains underwater as recovery continues to slow
Russia to start mass vaccinations on December 7
Azerbaijan’s Aliyev calls on Armenia, Russia, Turkey and Iran to assist in creating Nakhchivan land corridor
FPRI BMB Russia: Sberbank releases a three-year transformation strategy to e-commerce concern
Ukraine’s banking sector continues recovery, but profits still lagging last year
Ukraine’s real wages up over 10% in October but have been stagnant in dollar terms for almost a year
FPRI BMB Ukraine: Public has confused opinions on resolving the Donbas conflict
Western Balkans plus Ukraine subsidised coal with over €900mn in 2018-2019
Estonian parcel robot firm Cleveron eyes €30mn state loan
Estonia’s chief auditor says €1bn in state COVID-19 loans issued haphazardly
Economic sentiment in CEE falls in November as recovery momentum splutters
Estonian animation studio Imepilt to hold IPO
Brighter days ahead: The economic bounce back in 2021
Central, Southeast Europe stock markets jump in anticipation of COVID-free future
VISEGRAD BLOG: An easing of trade tensions but still an uncertain situation for export-oriented Central Europe
Hungary's PM risks isolation as Poland mulls dropping EU budget veto
Poland ready to back down from veto of EU budget
Hungary's ruling party in damage control mode after MEP sex scandal bombshell
Poland’s PMI remains stuck just above the improvement line at 50.8 in November
Czech companies dominate this year’s Deloitte Technology Fast 50 CE
Coronacrisis to get worse before it gets better forecasts wiiw
EU diplomats say no chance of Bulgaria removing veto for Skopje to start EU accession talks
IMF says downside risks to Albanian economy are increasing
EU ministers fail to agree on launch of accession talks with Albania and North Macedonia
Western Balkans commit to green agenda and regional common market at Sofia summit
Bosnia’s opposition ousts nationalist parties in major cities
Bosnia’s main ethnic parties fight to hold onto power in local elections
Southeast Europe’s EU members to get biggest boost from next budget and recovery funds
Bulgaria imposes 3-week lockdown to slow down COVID-19 spread
CEE politicians highlight trade and security ties as they congratulate Biden
Breakaway Transnistria fully under Sheriff’s control as Obnovlenie party sweeps board in parliament election
Moldova’s presidential election is over, now the battle for the parliament begins
Moldova’s foreign policy reset
Russian establishment quick to congratulate Moldova's new president-elect
Rising COVID-19 cases put intense pressure on CEE healthcare systems
MEPs urge European Commission to act against Hungarian media financing in North Macedonia and Slovenia
North Macedonia mulls decriminalising cannabis to boost tourism
Retail surpass pre-crisis peak as Romanians shop instead of holiday
Romania’s stability election
Romanian venture capital firm Catalyst launches new €40mn-50mn fund for TMT
The state is back in business
Slovenian PM Jansa stands alongside Hungary and Poland in EU rule of law row
BEYOND THE BOSPORUS: Turkish number crunchers deliver November inflation surprise of 14%
Erdogan needs to go says analyst assessing Turkey’s economic collapse
Ukraine strikes deal with Turkey to produce killer drones instrumental in Karabakh conflict
In Karabakh deal, as many questions as answers
Protesters flood Yerevan demanding Armenia’s “traitor” PM quit over Nagorno-Karabakh surrender
Who emerge as the real winners from the bloody Nagorno-Karabakh conflict?
Below average 2020 wine production destined for volatile and uncertain global market
Iran calls on Saudis to limit $67bn defence spending to Tehran’s $10bn
Iranian prosecutors pledge to pursue Trump for Soleimani killing even after he leaves White House
No reaction from Kazakh elites as bombshell FT report says Nazarbayev’s son in law siphoned millions from pipeline scheme
UK court freezes $5bn in assets connected to fugitive Kazakh banker Ablyazov
Attack of the Debt Tsunami: global debt soars to a new all-time high
Kyrgyzstan's proposed new constitution provokes widespread revulsion
Kyrgyzstan's China debt: Between crowdfunding and austerity
CFC joins RWC in assessing KAZ Minerals buyout offer as under-valuation
China business briefing: Not happy with Kyrgyzstan
Mongolian coal exports to China paralysed as Beijing demands virus testing of truck drivers
Mongolia fears economic damage as country faces up to its first local transmissions of coronavirus
Mongolia in lockdown after suffering first local coronavirus transmissions
Mongolia’s wrestling culture: From the grasslands to the cage
No surprises in Tajikistan as Rahmon retains presidency with 91% of vote
A Tajikistan poised on verge of economic calamity set for vote
Tajikistan revives on-off dispute with Iran
Turkmenistan: The dammed united
Turkmenistan: Everybody yurts, sometimes
Dirty money investigation reviews identified payments worth $1.4bn linked to Turkmenistan
Uzbekistan unveils extensive privatisation programme
Download the pdf version
Even though overall industrial production growth softened in 2019, some investment-driven sectors outperformed, including those focused on agriculture, oil downstream, chemicals, construction and transportation.
For 2020 we continue to expect acceleration given the budget stimuli that had already been planned and potential extra injections
Industrial production in 2019: pressured by OPEC+, weather, and pessimism over local consumer demand
Russian industrial production accelerated from 0.3% year on year in November to 2.1% y/y in December, somewhat below our 2.7% y/y expectations. We note, however, that both November and December data have been distorted by calendar effects: November 2019 had 1 workday less than November 2018, while December 2019 had 1 workday more than December 2018. Moreover, December data benefited from the splurge in year-end budget spending, which further complicates forecasting and lowers the indicative power of year-end statistics.
In full-year terms, industrial production (around 23% of the Russian GDP) decelerated from 2.9% y/y in 2018 to 2.4% y/y in 2019, which came in slightly below our 2.5% expectations. We don't take it as a sign of material deterioration of the industrial output trends for the following reasons:
The two key sectors that assured up to 80% of the slowdown were commodity extraction (37% of industrial output, growth decelerated from 4.1% in 2018 to 3.1% in 2019) and electricity&heat distribution (11% of industrial output, growth decelerated from 1.6% to 0.4%). This was a result of Russia's OPEC+ commitments to limit oil production and warm weather conditions that lowered local demand for electricity&heat (and therefore for gas production as well).
Manufacturing (50% of industrial output), the key portion of Russian industry, posted only a modest slowdown from 2.6% in 2018 to 2.3% in 2019, which is still an impressive figure given that for most of the year budget policy was not supportive, with the VAT hike pressuring consumer demand and budget spending dynamics improving only at the very end of the year.
Looking at the composition of the manufacturing output, the slowdown was driven by consumer-focused sectors (light vehicles, household appliances, office supplies, clothes), while others stand out as showing improved dynamics in 2019 vs. 2018, including oil downstream (7% of total industrial output), chemicals (4% of total), construction materials and metals (8% of total), and machinery and equipment focused on the agricultural sector.
Overall, the 2019 industrial output data points at a very limited negative reaction to adverse external and internal factors.
Budget policy will matter more in 2020
Looking into 2020, we see scope for acceleration in the industrial output growth, mainly thanks to the expected increase in the budget support.
Even before the recent government reshuffle, the overall size of National Projects (state spending on hard infrastructure and human capital) was supposed to increase from 2.7% GDP in 2019 to 3.3% GDP in 2020.
The composition of the new government suggests that the issue of spending backlog will be addressed. For example, the federal budget underspent around RUB150bn on National Projects in 2019 (RUB1.60 trillion was spent vs. a planned RUB1.75 trillion), and this sum may be carried over to 2020, adding to the existing plan of RUB2.0 trillion. Higher confidence in the government's ability to fulfil spending plans will be key in supporting optimism in the investment-driven industries.
The presidential address from last week suggests that social policy will be an important priority as well, which means that the overall spending backlog accumulated over the previous years and totalling RUB1.1 trillion (or 1.0% of GDP) might be repositioned in favour of additional support to household income, which may boost confidence among consumer-focused industries.
For now, we keep our previous expectations of industrial output accelerating to 2.7% in 2020 and see some upside risks to this forecast if the government confirms plans to accelerate spending. Amendments to the budget plan (which even before the reshuffle, assumed 7% nominal growth in federal budget expenditure in 2020) are expected to follow by 11 February.
Meanwhile, if higher budget spending will not be accompanied by systemic measures aimed at promoting broad-based business climate, its effect on economic growth might be limited, and the higher dependence of growth on state-driven sectors will remain a longer-term concern.
Dmitri Dolgin is the Chief Economist, Russia, at ING in Moscow. This note first appeared on ING’s “Think” portal here.
Content Disclaimer: This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
here to continue reading this article
and 5 more for free or purchase
12 months full website access including
the bne Magazine for just $250/year.
Register to read the bne monthly magazine for
Password could contain only
and have 8-20 symbols length.
Please complete your registration by confirming your
A confirmation email has been sent to the email
address you provided.
can't be empty.
No user with
this email address.
Access recovery request have been expired. Please,
Access recover request have been expired.
Please, try again.
To continue viewing our content you need to complete
the registration process.
Please look for an email that was sent to
with the subject line
"Confirmation bne IntelliNews access". This email will have
instructions on how to complete registration
process. Please check in your "Junk" folder in
case this communication was misdirected in your
If you have any questions please contact us at email@example.com
Sorry, but you have used all your free articles fro
this month for bne IntelliNews. Subscribe
to continue reading for only $119 per year.
Your subscription includes:
For the meantime we are also offering a free
digital weekly newspaper to subscribers to
the online package.
Click here for more subscription options,
including to the print version of our
flagship monthly magazine:
Take a trial to our premium daily news
service aimed at professional investors that
covers the 30 countries of emerging
For any other enquiries about our
products or corporate discounts please
contact us at
If you no longer wish to receive
Magazine annual print
Website & Archive
Combined package: web
access & magazine print
Take a trial to our premium daily news service
aimed at professional investors that
covers the 30 countries of emerging Europe: