Russian economy unexpectedly slows to weakest pace since 2009

Russia’s economy unexpectedly slowed in the second quarter to extend a slide that’s threatening to push the world’s largest energy exporter near recession.

Gross domestic product expanded 1.2% from a year earlier, the Federal Statistics Service in Moscow said today in an e-mailed report. That was below all 19 forecasts in a Bloomberg survey, which had a median estimate of 2%. The Economy Ministry had projected that output expanded 1.9% in the period.

The surprise deceleration underscores the challenges Russia is facing from weaker global demand for its commodities, which is compounding a domestic slowdown. Russia’s central bank left its main rates unchanged for an 11th month today while signaling increased concern about economic expansion.

“Weak investment activity and a slow recovery in foreign demand indicate that there remain significant risks of a Russian economic growth slowdown, including in the medium term,” policy makers said in a statement accompanying their rate decision.

The Micex Index of 50 stocks rose for the first time in six days and traded 0.3% stronger at 1,366.74 as of 3:04 p.m. in Moscow. The ruble depreciated less than 0.1% to 32.8510 against the dollar.

Investment, Spending

Economic growth has slowed every quarter since the final three months of 2011 as investment slumped and the government slowed spending increases following President Vladimir Putin’s re-election in March 2012.

Trade has also weakened, with Russia’s surplus narrowing 11% in the first half from a year earlier, according to Federal Customs Service data.

The first-half downturn has left the pace of growth too weak to achieve the government’s goals, Prime Minister Dmitry Medvedev said at a July 25 meeting when the cabinet approved a stimulus plan in a bid to boost the economy.

Stocks have taken a beating, missing out on a rally in the U.S. that sent the S&P 500 Index to a record high last week. The dollar-denominated RTS Index of 50 stocks is down 14% this year, more than the MSCI Emerging Market Index’s 10% decline.

Investment and retail sales have slowed, while “fairly negative” current-account data for the second quarter suggest net exports wouldn’t have boosted the economy, Dmitry Dolgin, an economist at Alfa Bank in Moscow, said before the release. He forecast a slowdown to 1.5% in the second quarter.

“The market’s expectations are based on the initial estimate from the government,” Dolgin said. “We’re a little unsettled by that number, because it’s not clear what would have provided the acceleration.”

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