Russia’s economic recovery continues and growth should go positive in the first half of this year, but it remains weak and fragile without the badly needed structural reforms and/or a boost in oil prices.

Oil prices that have been consistently over $50 have taken the pressure off the government and while the state is still going to run a deficit this year it will be a manageable 1.5%-2% that can be largely funded out of domestic borrowing. The Ministry of Finance has the authority to ramp up domestic borrowing from RUB500bn ($8.8bn) of domestic bond issues last year to RUB1.2 trillion this year and the two after that if needed. A Eurobond issue of about $3bn is also penciled into the budget.

But the government’s greatest success has been the Central Bank of Russia (CBR) drive to reduce inflation to 4%. Currently at 4.3% the CBR now thinks this target could be reached as soon as May and made a surprisingly large 50bp rate cut to 8.75% in its April meeting as a result of this progress. That should boost growth and reduce amount of speculative money that has been pouring into the local bond as a “carry trade.”

However, on the ground things are less rosy. While real wages are slowly rising the more important real disposable income (inflation adjusted, minus food and utilities) is still shrinking, albeit at slower rates. Russians still prefer to save than spend and so consumption remains soggy. Retail turnover has been contracting for about two years, although in March it shrank by only 0.4% so this indicator should turn positive in the next couple of months. However, our Watcom shopping index, which is an immediate measure of shopping in Moscow’s biggest malls, is off to its worst start in at least three years and is still running behind previous years in April.

The population is feeling a lot of pain from the economic slowdown and while the macroeconomic situation has improved noticeably since the start of the year – another example is gross international reserves (GIR) broke above $400bn for the first time since 2013 in April – this has yet to filter down to man in the street.

This has been manifest by country-wide protests in April targeting the blatant corruption of Russian prime minister Dmitry Medvedev, who it turns out is a billionaire, organized by anti-corruption blogger and opposition leader Alexei Navalny, who has struck a nerve. Other protest have appeared such as a big demonstration in the normally quiet Dagestan by truck drivers protesting against new taxes, or pensioners in the Far East protesting against benefit cuts. There protests remain very small in comparison to the size of the population and Putin maintains his 82% approval rating, but they do suggest that the population is becoming more politically conscious ahead of the 2018 presidential elections. Putin will win those easily, not just because he is popular, but because the opposition is in disarray. Navalny is making waves, but he is not a viable presidential candidate. The Communist party is currently revamping itself and is the only possible alternative to Putin, but here too the chances of any really serious challenge to Putin is minimal.