• Thu. Feb 29th, 2024

Economic Growth or Illusion: Russia’s Hidden Challenges in the Wake of Sanctions and Military Boost


Feb 12, 2024
IMF’s Georgieva predicts challenging times ahead for Russia’s war economy

The Russian economy is facing significant challenges due to high military spending and a decrease in consumption, according to International Monetary Fund’s managing director Kristalina Georgieva. She explained that the boost in economic growth resulting from military production is masking the problems that are affecting the living standards of Russians.

Georgieva spoke with CNBC about the IMF’s forecast of 2.6% GDP growth for Russia this year, expressing concern that military production is increasing while consumption is decreasing, creating a similar situation to what the Soviet Union experienced with high production and low consumption.

While Russia’s economy rebounded sharply from a slump in 2022, resulting in 3.6% growth in 2023, after a 1.2% contraction the previous year, Russia-based economists have commented on the poor quality of this economic growth. They emphasize that while missiles and shells may contribute to higher GDP, they offer limited benefit to the population.

Georgieva also pointed out that sanctions are impacting Russia’s economy negatively by reducing access to technology and causing an outflow of people. Despite the seemingly positive 2.6% GDP growth forecast, she suggested that there is a bigger, less positive story behind it.

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