GDP +0.6%

GDP was boosted by a 2.5% increase in retail sales (which grew at a yearly rate of 5.3% in December) as a result of pent-up demand being released and consumers purchasing ahead of expected price rises. GDP also benefitted from a record crop season which caused agricultural sector to grow by 3.7% for the year despite lower prices in key commodities such as wheat. Uncertainty about taxation, the geopolitical situation and the price of oil weighed on GDP as investment fell by 2.5%.



Trade Balance (for Jan-Nov): +176bn dollars +6.6%

A deterioration in the oil price by 8% for the whole of 2014 helped to push the value exports down by 3.8% to 459bn dollars – 70.2% of which fell under the category “fuel and energy”. Meanwhile, a weak Ruble and food sanctions caused a fall in imports 7.6% to 263bn. Notably total trade with Ukraine fell by Trade with Ukraine fell by 27.1% to 26.2bn. China was Russia’s largest trading partner with 81.1bn in bilateral trade.



Industrial Production: +1.7%

The signing of the Power of Siberia gas pipeline with China drove a 14% increase in pipe output, food sanctions drove a 14% increase in cheese production and 13% in meat, aggressive expansion drives by Bashneft and GazpromNeft meant that oil extraction grew by 0.8% and collapsing auto demand drove suspensions in production facilities resulting in a 10% contraction in auto production. GDP was boosted by a 2.5% increase in retail sales (which grew at a yearly rate of 5.3% in December) as a result of pent-up demand being released and consumers purchasing ahead of expected price rises. GDP also benefitted from a record crop season which caused agricultural sector to grow by 3.7% for the year despite lower prices in key commodities such as wheat. Uncertainty about taxation, the geopolitical situation and the price of oil weighed on GDP as investment fell by 2.5%.A deterioration in the oil price by 8% for the whole of 2014 helped to push the value exports down by 3.8% to 459bn dollars – 70.2% of which fell under the category “fuel and energy”. Meanwhile, a weak Ruble and food sanctions caused a fall in imports 7.6% to 263bn. Notably total trade with Ukraine fell by Trade with Ukraine fell by 27.1% to 26.2bn. China was Russia’s largest trading partner with 81.1bn in bilateral trade.The signing of the Power of Siberia gas pipeline with China drove a 14% increase in pipe output, food sanctions drove a 14% increase in cheese production and 13% in meat, aggressive expansion drives by Bashneft and GazpromNeft meant that oil extraction grew by 0.8% and collapsing auto demand drove suspensions in production facilities resulting in a 10% contraction in auto production.

CPI: +7.8% and Real Disposable Income: -1%

The inflation rate quickened to 7.8% in 2014 from the prior 6.8% - the major driver of this was changing food prices – which grew by 10.1% in contrast to non-food goods which grew by 5.3%. The inflation in food prices was due to the introduction of retaliatory sanctions and was unexpected when wage decisions were made; consequently, real disposable incomes shrank for the first time since 2000.



Capital Flight: 151.5billion, of which debt repayment: 129bn

Russian corporates aggressively paid down dollar debts after being shut-off from re-financing owing to western sanctions and negative market sentiment towards Russia. Russian foreign currency denominated debt fell from 728 billion to 599 billion by the end of the year. Russian households transferred 34 billion into dollar savings accounts from Rubles.

Dollar/Ruble increased from 33 to 56

Despite a major strengthening in the dollar against all other currencies in the world, the major driver in the Russian exchange rate was the combination of oil and sanctions. Owing to the sanctions Russia could not refinance its debt and thus in the short term the economy had to “balance”. Balancing was focused on an oil price of around 3,600 rubles per barrel of oil which held with an approximate 10% range for the entire year. This dynamic explains why other economies even more dependent on oil did not have such a large move in their currency.