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10:44 28.04.2024 •
Russia’s government touted robust domestic demand in boosting its 2024 growth forecast on Tuesday. While some might be tempted to dismiss the move as geopolitical bravado in the face of the US stepping up Ukraine aid, Russian economic strength is real, Bloomberg writes.
In fact, Moscow’s new 2.8% GDP projection weighs in under the IMF’s latest (also upgraded) forecast, of 3.2%, released last week.
Again it might be tempting to put this resilience down to a massive defense build-up. But the Washington-based IMF had much the same assessment as President Vladimir Putin’s team: a strong job market and swift wage rises are helping to power consumer spending. The fund even cautioned “there are some signs of overheating,” with unemployment at a record low.
What about all the Western sanctions, the mass emigration of Russian talent and the departure of a number of global corporate giants? Bloomberg Economics offers some insight:
The sanctions on Russian energy aren’t as tight as they were for, say, Venezuela and Iran, thanks in large part to the West not wanting to worsen its own cost-of-living shock with a further surge in oil prices.
Russian households remain confident thanks to a tight labor market, with the jobless rate at 2.8%. A largely voluntary military recruitment model, using monetary incentives, has let consumers keep calm and carry on.
Some large multinationals have stayed in place.
So will Russia’s economy just keep on ticking?
Moscow needs crude prices to stay around the current $90 a barrel levels to keep the budget balanced — a slump to, say, $60 could make things difficult.
The IMF sees growth slowing to 1.8% next year, and cautioned that Russia’s potential growth rate has dropped to around 1.25% from 1.7% before the war.
“This would mean that Russia’s income per capita may no longer converge toward Western European levels in the medium to long term.”
But for now, Russia’s chugging right along.
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