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. 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.
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. 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. As a result, Russia’s budgetary position has moved from a 1 percent surplus to a 2 percent deficit.
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. It is clear that the Russian economy is now substantially oriented toward war purposes. 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.
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