According to a flash estimate of the Ministry of Economics, real GDP growth decelerated to a disappointing +0.8% y/y in Q1 2019 from +2.7% in Q4 2018. A slowdown had been indicated by high frequency activity indicators but the extent surprised. Industrial production and retail sales growth moderated to +2.1% and +1.8% y/y in Q1, respectively, after both had expanded by +2.7% in Q4. Moreover, the manufacturing and services PMIs eased slightly but remained well in growth territory in Q1, at average 51.3 and 54.9 points, respectively. In April, the manufacturing PMI remained solid though it decreased to 51.8 from a two-year high of 52.8 in March. For now, we maintain our full-year GDP growth forecast of +1.5% for 2019. Meanwhile, the Central Bank of Russia (CBR) kept its key policy interest rate unchanged at 7.75% last week. Consumer price inflation edged up to 5.3% y/y in March from 5.2% in February. We maintain our forecast that inflation will average around 5.0% in 2019.
