Russia’s Economic Growth Outpaces G-7 Despite Increasing Defense Spending
By In the last few years, Russia has been making headlines for its economic growth and its record-high oil and gas revenues. Despite a predicted drop in GDP of up to 3.9% in 2022, the International Monetary Fund (IMF) now forecasts growth of 2.1% in 2024, which is a substantial upward revision compared to previous forecasts.[0] This economic growth is expected to outpace that of the G-7 economies in the coming year, with the IMF forecasting a growth rate of 0.3% for 2023.[1]
However, it is important to note that this growth is largely due to the fact that Russia has had to devote an increasingly large share of its economy to its defense industry.[2] Federal military spending increased to at least 5 percent of GDP, or some $90 billion, and the Kremlin has obliged regional and local authorities to use their resources to equip soldiers with basic military goods in the draft.[2] As a result, Russia’s budgetary position has moved from a 1 percent surplus to a 2 percent deficit.[2]
In addition, Russia has increased its defense spending by 43 per cent from 2021 levels, and is expected to spend more than $84 billion on defense this year.[0] It is clear that the Russian economy is now substantially oriented toward war purposes.[2] Nevertheless, the Russian economy is still faring better than many independent forecasts suggested last year, and has managed to buffer the shock and sustain its economic base to a significant extent.[2]
0. “Russia’s economy is expected to outpace the economy of every G7 country next year. Why the West’s sanctions have been almost useless” Toronto Star, 11 Feb. 2023, https://www.thestar.com/business/opinion/2023/02/11/how-the-wests-sanctions-blitzkrieg-has-had-little-effect-on-russia.html
1. “The sanctions war against Russia: a year of playing cat and mouse” The Guardian, 20 Feb. 2023, https://www.theguardian.com/world/2023/feb/20/sanctions-war-russia-ukraine-year-on-vladimir-putin
2. “Russia's War Economy and the Impact of Sanctions on Military Production” IP Quarterly, 15 Feb. 2023, https://ip-quarterly.com/en/russias-war-economy-and-impact-sanctions-military-production
