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Russia in Recession: Growth Contracted by 4.6% in Q2

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Nov. 20 2020, Updated 2:31 p.m. ET

Russia in recession

Russia’s annual GDP (gross domestic product) growth rate plummeted to -4.6%, according to the latest figures released from the Federal State Statistics Service on Tuesday, August 11. This fall marks the second consecutive quarter of negative growth figures for Russia. Consequently, Russia entered a recession—a first in six years. The news weighed down the Russia-tracking VanEck Vectors Russia ETF (RSX). It plummeted 2.5% on Tuesday’s close. RSX has gained 13.47% YTD (year-to-date)—as the Russian ruble has hit new highs in 2015.

According to the report, growth in Russia’s GDP contracted by 4.6% on an annual basis in the second quarter this year, following a 2.2% decline in the previous quarter. The Federal State Statistics Service has reported a preliminary figure for Q2, showing that Russia is in recession.

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Falling trade and oil prices have severely affected Russia

In Russia, trade has been severely affected by Western sanctions. To learn more, read Must-know: US sanctions target flow of investments into Russia. The sanctions imposed against Rosneft (OJSCY), Novatek (NOVKY), and Gazprombank (OGZPY) hurt the Russian economy the most.

To add to the economy’s existing woes, the decline in oil prices has further accelerated Russia’s economic slowdown. Industrial production is down. Retail sales have been declining, as inflation continues to accelerate. The slump in oil prices has been eroding the country’s export revenues. Russia is a major oil and gas exporter, with the sector alone accounting for about half of Russia’s budget revenues.

Stay updated on our latest analysis on the US (SPY) (IVV), Eurozone, and world (ACWI) macro environments by visiting Market Realist’s Macro ETF Analysis page.

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