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The recession is getting closer

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Another sign of impending recession in Russia in June business activity in the country dropped sharply to the lowest level since January of 2016, according to the survey PMI Markit IHS.

Moreover, the first time the index dropped below the 50 points that separates growth in activity from contraction. The aggregate PMI declined to 49.2 from 51.5 in may. The index of services also fell to 49.7 points from 52, and the industry was below 50 in may (49,8).

IHS Markit explains the drop in overall reduction in new orders, jobs and poor business expectations in the services sector.

The sharp slowdown of economic growth, saying other indicators. For example, loading on the Railways by the end of June showed a sharp decline by 5.4% (in just six months — 1.5%). The last time a similar pattern was observed during the stagnation of 2012 and the crisis of 2008.

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Official indicators also give a picture of the deterioration of the Russian economy in the first half. In the first quarter, GDP grew by only 0.5% in April GDP of 1.6%, but in may the growth rate fell to 0.2% per annum. In January—may 2019 the economy has grown by an estimated 0.7%.

On Wednesday, Rosstat reported that the production of goods and services by basic economic activity in may fell by 0.3% — this is the first time since February of 2017.

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Russian authorities expect that growth will help large-scale investments from the budget of the national projects. In 2019, these investments are estimated at 3.4 trillion rubles — this is more than 3% of GDP. But, like economists, “Alfa-Bank” in a recent review questioned that in 2019, the money will reach the economy, and their net direct effect on GDP growth were evaluated by only 0.2% per year.

Andrei Nechayev, economist

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