Annual Report 2014

The Russian Economy in 2014

Even though the Russian economy experienced a series of shocks in 2014, it still demonstrated an annual growth of 0.6%, which is 2.2 times less than the 2013 growth rate. The main reason for the sharp decline in economic growth lies in the geopolitical tension, causing a number of severe macroeconomic effects, such as the drop in the Russian rouble exchange rate, soaring inflation, and higher interest rates.

As in the previous years, the leading positions within GDP growth structure were held by the financial sector, which gained 9.6% over the year. Other sectors demonstrated significantly slower or negative growth.



Apart from the actual deceleration, a certain change in economic growth structure should also be noted. Manufacturing industries started playing a more significant role in 2014, with a somewhat lower importance of the services sector.

Some industries showed moderate growth. In particular, the declining RUB exchange rate provided additional opportunities for an import substitution increase. The industries which demonstrated an upward trend in 2014 include, among others, vehicles and equipment manufacturing, rubber and plastic goods production, and the petrochemistry and food industries.



The real income of the population was at record low in terms of growth, gaining only 1.3%, as compared with a 4.8% increase in 2013. Real disposable cash income decreased by 0.1%, while in the previous year it demonstrated 4.0% growth.

The unemployment level went below 5% during 2014, but by the end of the year reached 5.3%, which is only 0.3 PP lower than in December 2013.

The 2014 inflation rate was significantly higher than in the previous year. Growth in consumer prices amounted to 7.8% on average in 2014, and 11.4% by the end of the year. In 2013 this indicator was more stable: 6.8% in average and 6.5% by the end of the year. The main reason for the rising inflation rate in 2014 was the significant depreciation of the Russian rouble against the US dollar and Euro.

As a result of the events in Ukraine, a number of sanctions were introduced against Russia by the US and the EU. The major effects of these actions were the limitations imposed on foreign funding which, coupled with the sharp drop in oil prices, resulted in an unprecedented depreciation of the Russian rouble.

The 2014 balance of trade was USD 185.6 bn, which is 2.0% higher than in the previous year. The average price of URALS brand oil showed a critical decline in 2014: USD 98 against USD 108 in the previous year. At year-end 2014 oil price plummeted to USD 53 per barrel. Capital outflow totalled USD 126 bn, as compared with 45 bn in the past year.

The Russian financial market was unstable throughout 2014. The RTS Index declined by 45.2%, and the federal loan bond (OFZ) yields rose by 5.6 PP due to geopolitical tensions and the 11.5 PP increase of the CBR key interest rate, accompanied by a major depreciation of the Russian rouble.

The survey was provided by the Bank Saint Petersburg’s Research Department.