Russian economy shrinks much less than expected

Russia's GDP shrank 1.9% y/y in Q1 15, according to the country's statistical service Rosstat, far better than consensus (-2.6% y/y). Russia's ministry for economic development expected a 2.2% y/y fall. 

The freely floating rouble has protected the Russian economy better than expected from external shocks. Due to significant devaluation and sanctions, local production benefited the most, expanding 0.6% y/y in Q1 15 on average, versus 0.9% y/y a year earlier.

"We see significant upside risks to Russia's growth from the oil price rebound, more dovish than expected monetary stance, and any revocation of sanctions, which would improve the sentiment. Yet, as the geopolitical situation in Eastern Ukraine continues, further escalation would pose downside risks, as would a drop in oil prices." said Danske Bank