OREANDA-NEWS. May 18, 2010. Rosstat released an initial estimate of 1Q10 GDP growth, putting the figure at 2.9% YoY, reported the press-centre of OTKRITIE Financial Corporation.

View: The 2.9% YoY GDP growth figure was a negative surprise since markets were mulling late April Economic Ministry assessments of 4.5% growth for 1Q10. Considering the weak base of 1Q09, when the economy dropped 9.4% YoY, we clearly treat the 1Q10 recovery as very weak.

The Ministry of Economic Development also admitted that most likely this figure implied a lack of positive growth QoQ in seasonally adjusted terms. By our estimate, the decline was at least 1% QoQ. This underscores our view that the key sources of the 2H09 recovery -- exports growth and restocking – have probably already been exhausted.

Our major concern,  however, is that the improvement in consumer demand-- largely driven by the state spending-- will be increasingly matched with acceleration in imports. In March, import rose 29% YoY. Nevertheless, it is still too early to revise our FY10 GDP forecast (3.1% growth). We believe that the poor 1Q10 results, especially in the construction and investment realms, were partially affected by an especially cold winter. We also feel that some revival in the financial sector and the first signs of lending growth indicated by the CBR in March-April will support economic activity later in the year.