This post first appeared on FloatingPath
Russia’s economy grew at just 1.2% for the third quarter this year according to data just released by the government there.
Russian policy-makers and central bankers have been fighting an uphill battle of late with domestic demand dropping while inflation remains stubbornly elevated. In trying to fight rising prices, the Russian central bank has kept rates abnormally high given the tepid growth over the past few quarters.
The recent drop in the price of crude oil is also sure to hit the country hard. By some accounts, up to 80% of Russian exports are attributed to the gas and oil sector and profits from state-owned companies like Gazprom make up a lion’s share of the nation’s budget.
The economic struggles have also affected the country’s stock market. While the S&P 500 has logged a gain of 24.2% this year, the RTS Index has fallen by 6%.
“All of the data for the third quarter have been weak,” Artem Arkhipov, chief economist for Russia at ZAO UniCredit Bank in Moscow, said by e-mail yesterday. “I’m becoming a skeptic on the chances for a change in rates this year. October inflation dealt a sharp and unexpected surprise.”
Car sales in Russia have also been struggling according to Bloomberg. New sales were down for an eighth straight month, dropping 8% for October. The nation’s largest automaker, AvtoVAZ recorded a 25% decline in sales for October compared to the same month the year before.