May 27, 2019

Russia’s Economic Growth and Electricity Consumption

The shadow economy and the military-industrial complex may play an important role in the Russian economy.

According to data provided by Rosstat (the Russian Federal State Statistics Service), the country’s gross domestic product (GDP) increased in 2018 by 2.3%.1

The increase shown by Rosstat was higher than in earlier prognoses. For example, the Russian government had expected the increase to be 1.8%, the Central Bank 1.5–2.0% and the Ministry of Economic Development 2.0%.

Rosstat initially explained the unexpected economic growth by an increase in the construction industry,2 which it claimed had grown by 4.7% compared to 2017. This claim was quickly overturned, however, as both the production and importation of construction materials in Russia decreased in 2018.

Rosstat also offered as possible explanations an increase in investment,3 mainly in LNG production on the Yamal peninsula, where the company Novatek expanded its liquefaction plant. While initial estimates showed a 2.2% increase in investment last year compared to 2017, the new data demonstrated almost double that—4.3%.

Why This Matters

At first glance, it does not seem to matter that much whether Russia’s GDP grew by 1.5% or 2%. However, Russia’s government sees the increase of over 2% as significant.

First, it shows the economy’s ability to function despite Western sanctions. Second, a growing economy should serve as proof to investors that Russia is a worthy destination for their funds. Given these political interests, experts’ suspicions of statistical manipulation are justified.

These doubts are supplemented by the changing of Rosstat’s director-general in December 2018. Pavel Malkov of the Ministry of Economic Development replaced Alexander Surikov, who had held the position for nine years.4 Apparently, the change in Rosstat’s leadership was caused by negative economic indicators two years ago.

The silencing of the experts criticising Rosstat’s data is also worthy of note. For example, Andrei Klepach, the chief economist at Vnesheconombank, wrote that, according to his information, Russia’s GDP increased in 2018 only by 1.5% and that he would not believe in any greater economic growth until he saw conclusive evidence of how this had been achieved.5 Russian news channels later announced that Klepach’s article had been taken down,6 as it had been posted by mistake.7

The February bulletin of the Russian Central Bank’s Research and Forecasting Department claims that Rosstat’s updated data on economic growth had probably been adjusted at the expense of previous years.8

This begs the question: did Russia’s GDP change in 2018 and, if so, by how much?

Russia’s GDP and Oil Prices

One of the ways to look at changes in Russia’s GDP is through the price of oil, even though the share of fossil fuels (including oil) in the Russian economy is somewhat difficult to assess.9 For example, their extraction provided less than 8% of GDP in 2018, while the share of the fuel and energy complex as a whole10 accounted for about 20%.11

However, oil, natural gas and coal still account for a large share of Russia’s budget and export income—45% and 63.7% respectively in 2018.12 For this reason, a strong connection can be expected between the Russian economy and oil prices, allowing them to be used to determine changes in Russia’s GDP.

Figure 1 compares Russia’s nominal GDP with the annual average price of Urals oil from 2001.

GDP data is taken from the IMF database, which estimated Russia’s total GDP in 2018 as 1.576 trillion US dollars and the annual change at ₋0.07%.

The price of Urals oil is calculated as the 12-month average based on data published by the Central Despatching Department of the Russian Fuel and Energy Complex.

Figure 1. Changes in Russia’s nominal GDP (billion USD; solid line, left Y axis) and Urals oil price (dotted line, right Y axis), 2001–18.

These data demonstrate that, since 2015, oil prices can no longer be used to predict changes in Russia’s GDP with the same precision, since there have been fewer points of coincidence. Even if one believes Rosstat’s data, the claimed 2.3% GDP increase is significantly lower than the rise in oil prices. The same goes for the figures for 2017 and 2016. An analysis of the reasons for this phenomenon goes beyond the scope of this article.

GDP and Electricity Consumption

Another way to evaluate whether the economy is growing or shrinking is through electricity consumption, whose connection to GDP has been looked at before, including in the context of Russia.13 This research seems to show that electricity consumption and GDP have a strong mutual and complementary connection. In other words, GDP and electricity consumption support each other—should one change, the other will follow.

Figure 2 compares the changes in Russia’s GDP and electricity consumption from 2016 on the basis of quarterly figures.

Data on Russia’s electricity consumption are taken from the website of Russia’s operator, SO UPS ( Daily consumption data have been summarised monthly and then quarterly since 2016. Seasonal variations have been smoothed out using the moving average method.

Data on Russia’s GDP are taken from the Rosstat website,, which presents smoothed quarterly figures at constant prices. For the purpose of this article, data with a fixed reference year (2016) have been chosen.14

Figure 2. Russia’s quarterly GDP (2016 constant prices, seasonal variations smoothed, billion RUB; solid line, left Y axis) and electricity consumption (seasonal variations smoothed; dotted line, right Y axis)

In order to calculate the changes in GDP based on electricity consumption, the fluctuations of both indicators must be compared against those of the previous quarter of the same year. The ratios are shown in Figure 3.

Figure 3. Changes in quarterly GDP (dotted line) and electricity consumption (solid line) compared to the previous period (quarter)

The results seem to show that in the fourth quarter of 2018, Russia’s GDP growth was in the same order of magnitude as the previous three quarters and did not exceed 0.5%.

By extrapolating the data for the first three quarters of 2018, it can be claimed that Russia’s economic growth in 2018 cannot be greater than 1.5%.

In other words, the change in electricity consumption does not confirm the increase in 2018 GDP claimed by Rosstat. This conclusion is compatible with earlier prognoses of economic growth and some expert opinions.

GDP vs Electricity Consumption

We can see an interesting result when comparing Russia’s annual GDP with total electricity consumption indicators. This can be seen in Figure 4, which contrasts Russia’s annual real GDP (taken from the IMF database) and annual electricity consumption, as shown and summarised on the SO UPS website.

The data start in 2001, as the operator’s data for 2000 contain some gaps, and no earlier electricity consumption data are available.

Figure 4. Comparison of Russian GDP (billion USD) and total electricity consumption (TwH)

The trend line of the connection between GDP and electricity consumption in the figure shows a strong linear relationship in 2001–14 (inclusive).

The last four years mark a significant exception. In 2015–18, Russia’s electricity consumption was greater than what could be presumed from economic growth.

We can conclude that the growth in Russia’s economy has been in sectors not included in Rosstat’s data. This might be partly the cash-based shadow economy, which avoids official accounting, or part of the state’s military-industrial complex, data for which are classified.


1 Росстат: “ВВП России вырос в 2018 году на 2,3%” (Rosstat, “Russia’s GDP grew 2.3 per cent in 2018”), 4 February 2019.

2 “Чем объясняется неожиданное ускорение российской экономики” (“Explanations behind the unexpected acceleration of Russia’s economy”), 4 February 2019.….

3 Ведомости (Vedomosti), “Досчеты Росстата ускорили рост инвестиций вдвое” (“Rosstat’s new data doubled investment growth”), 5 March 2019.





8 Russian Central Bank, Bulletin no. 1 (29),….

9 When calculated using various methods, this indicator remains between 10% and 15%.

10 This comprises mining, and fuel and energy production.



13 Faisal, Turgut Tursoy and Nil Gunsel Resatoglu, “Energy Consumption, Electricity, and GDP Causality: The Case of Russia, 1990–2011”. Procedia Economics and Finance 39 (2016), pp. 653–9.

14 Data as at 1 March 2019. In April, data were changed retroactively.


This article was published in ICDS Diplomaatia magazine.

Filed under: CommentaryTagged with: