Russia's economy remained very soft in Q2, although it does at least seem to have dodged a technical recession – albeit by the skin of its teeth. Much of the weakness seems to be concentrated in the services sector, where slow household income growth and the lingering effects of January’s VAT hike are weighing on activity. Policymakers are starting to respond – the central bank is set to cut interest rates again this month and fiscal policy is likely to become less restrictive. This should help to spur a modest turnaround in the second half of 2019.
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