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Working paper

Business and consumer surveys in Russia: Focus on economic sentiment and GDP growth

Inclusive and Sustainable Development Working Paper Series. WP. United Nations Industrial Development Organization (UNIDO), 2020. No. 7/2020.
This study determines the effectiveness of using assessments and expectations of economic agents in the analysis of macroeconomic development. The paper tests the hypothesis of the cyclical interaction between economic growth and entrepreneurial behaviour. The authors used the composite economic sentiment indicator (ESI), which combined the confidence indicators of all sectoral business and consumer surveys by the Federal State Statistic Service and the Higher School of Economics reflecting the aggregate sentiment and expectations of approximately 24 thousand entrepreneurs and 5 thousand consumers. The empirical relationship and joint cyclical sensitivity of ESI and GDP growth time series are revealed based on cross-correlations, statistical filtering, a long-term linear regression, and through a two-dimensional vector autoregression model. This model is used further for GDP growth until the end of 2021. Forecasting considers the expected impact of new corona crisis shocks for the Russian economy, which have been growing since March 2020, on the aggregate economic sentiment. The forecasting results show the expected sharp decline in the GDP dynamics in mid-2020 after coronavirus containment measures and a tremendous drop in oil prices, then a slow and unstable recovery in GDP growth by the end of 2021 only to the level of Q4 2019.