Investments by companies and state enterprises and the solidity of private consumption in Russia will favor growth together with its huge oil exports.
In 2024, Russia’s economy will grow by +3.2%, exceeding the growth rates expected for the world’s advanced economies, including the United States. The Moscow government has kept public spending steady, which has helped maintain stable oil exports, according to the International Monetary Fund (IMF) in its World Economic Outlook report.
Although the weight of Western sanctions continues to weigh on the Kremlin, the IMF updated its January forecast for the Russian economy and said that its growth in 2025 will be lower, but still higher than previously forecast (+1.8%). According to Petya Koeva Brooks, deputy director of the IMF, investments by companies and state enterprises and "the solidity of private consumption" in Russia would have favored growth together with its huge oil exports.
Russia is one of the largest exporters of oil in the world. In February, the BBC revealed that millions of barrels of fuel obtained from Russian oil were still being imported into the United Kingdom. This will be irritating for Western nations, CNBC wrote, who have tried in every way to isolate and punish the Russian Federation for launching its illegal invasion of Ukraine.
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IMF forecasts on Russia
Except Russia, the IMF has lowered its forecasts for Europe and the United Kingdom, forecasting growth of +0.5% for London, and making the UK the second most weak in the G7 group of advanced economies. What about other nations? The United States is expected to grow by +2.7%, Germany by +0.2%, while Italy and France by +0.7%.
The exploit achieved by Moscow is therefore surprising. What happened to the Kremlin economy? Russia continues to insist that Western sanctions against its strategic industries have only made it more self-sufficient and that private consumption and domestic investment have proven resilient. Meanwhile, the continuous exports of oil and raw materials to non-EU countries, such as India and China, as well as the alleged evasion of sanctions and the high prices of black gold, have allowed the State led by Vladimir Putin to maintain robust revenues.
It is important to consider the contribution of the Defense industry, which supports the military operations of the Russian army in Ukraine. Put another way, Russia has adapted to a “new normal”. It now operates a war economy, and at the same time, it has been able to find new outlets capable of replacing its European partners.
In any case, the IMF has, however, predicted that economic growth in the Russian Federation will moderate in 2025, falling to 1.8% "as the effects of high investments and robust private consumption, supported by wage growth in a rigid labor market."
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Moscow’s new normal
In February, the IMF chief said the Russian economy was still facing significant headwinds, despite the Fund’s rosy forecast for the country, which has about 145 million inhabitants. “What do the data tell us about Russia’s growth? That it is a country with a war economy in which the State - which we remember had a very substantial cushion, built over many years of fiscal discipline - is investing in this same war economy", explained Kristalina Georgieva.
“If you look at Russia, today production increases, for the armed forces, and consumption decreases. And this is more or less what the Soviet Union looked like. High level of production, low level of consumption,” Georgieva herself added.
However, Moscow’s new normality goes far beyond imitating the Soviet Union. Yes, because the Kremlin seems to have entered a new economic order including some of the largest and most important economies on the planet. We are talking about an order made up of the giants China, India, and Saudi Arabia, but also of a host of developing countries which should, in the medium-long term, transform themselves into significant economic powers (from the ASEAN nations to some Africans).
Original article published on Money.it Italy 2024-04-27 12:04:00. Original title: L’economia della Russia? Nel 2024 crescerà del 3,2% (più di Uk, Francia e Germania)
