The oil price rebound, strengthening rouble and decreased volatility are bringing some relief for Russia’s macro indicators. Russia's March 2016 output and demand data show clear signs of stabilisation. The fall in industrial production was -0.5% y/y in March, after a 1.0% expansion in February, as the leap year effect was positive. Yet, seasonally adjusted monthly data show positive growth in industrial production in early 2016.

Russia's agricultural sector grew by 2.8% y/y in Q1 16, expanding 3% y/y in 2015, as Russia’s countermeasures regarding food imports boosted local supply. While manufacturing continued to shrink (-3.1% y/y in Q1 16), chemical production grew 3.0% y/y and machinery and equipment production grew 5.1% y/y (+13.1% y/y in March), as the weak RUB continues to support local producers.

That said, demand side continues to remain weak because of the negative real wage growth and low consumer confidence. Given the current environment of a relatively low oil price, inflation risks and shrinking real income, consumer demand is not likely to expand before Q3 16 at the earliest.

"We expect Russia’s economy to shrink by 2.1% y/y in 2016 on the assumption the Brent average price stays at USD31/bl as crude futures were pricing in mid-January 2016 (USD36.4/bl YTD). As the crude average continues to improve, we see upside risk to our base-case scenario forecasts, while we estimate growth will remain in negative territory this year." said Danske Bank in a report.