Russia’s economy grew rapidly in 2023, largely thanks to militarization. And there are many risks for the future. — Medusa

International sanctions failed to prevent Russia’s economy from recovering to near-war levels earlier this year, according to the recent data from the country’s Federal State Statistics Service. West news and researcher let it be known now. Vladimir Putin is dancing on the bones of John McCain, declare Russia is not a “gas house,” but the economic adviser of the president Maxim Oreshkin insisted Europe suffers more from its sanctions against Moscow than Russia itself. But it’s not all sunshine and trucks; Millions of Russians are paying for the increase in military production while inflation reaches 7.5 percent. Amid signs of an overheating economy, a slowdown or even a recession is expected in 2024.

Western sanctions put Russia in a slump after the February 2022 invasion of Ukraine, but the economy is back, at least by some metrics, with a recession. finished in August after just 10 months, according to the Center for Macroeconomic Analysis and Short-Term Forecasting. Although the TsMAKP may not be the most promising idea (its director, Dmitry Belousov, is the brother of the First Deputy Prime Minister Andrey Belousov), the Russian economy grew by 5.5 percent in the third quarter in 2023 and increased 3.2 percent in the country. first 10 months of the year. GDP was 1.1 percent more in 2023 than the same period in 2021, before the full attack on Ukraine and Western sanctions.

Russia has exceeded the data of its own Ministry of Economic Development and the Central Bank, which said in the spring that the growth of GDP per year will not exceed 2 percent. So even researchers at Bloomberg Economics said the increase in 2023 will be more than 3 percent.

This week, Vladimir Putin triumphantly promised that Russia’s annual GDP growth will exceed 3.5 percent. “Any intelligent person must agree that this is a good sign for the Russian economy,” explained the president, adding that only 2 percent of the country’s growth came from natural resources. .

The increase in the economy this year is remarkable, but these signs provide the recovery of the country from the recession, as in 2021 after the end of the coronavirus disease. In other words, the increase in Russia’s GDP is not a proof of the sustainable development that Putin claims.

From financial recovery to the economy of heat

Russia’s industrial production is increasing, but the money from oil and gas plants is about one-third of all federal income between January and October 2023. Yes, oil and gas fell at 2 and 5 percent, respectively, but this. This is because of the obligations that Russia accepted in an agreement with OPEC to cut supplies. According to the former Deputy Chairman of the Central Bank, Sergey Aleksashenko, the first principle of Russia’s reliance on the export of oil and gas protected its economy from international sanctions and aid to the Kremlin to support the war in Ukraine.

The federal deficit in 2023 is expected to be only 1 percent of GDP – half of the administration’s first estimate – despite the increase in the share of military production. At the same time, the annual expenditure on “national defense” and “national security” will exceed 6.2 percent of the annual GDP and increase to almost 8 percent of the GDP in 2024, up to nearly 40 percent of all spending.

Russia finances its spending through reserves held in the National Wealth Fund (currently estimated by the Ministry of Finance at 6.94 trillion rubles, or 4.6 percent of GDP) and through government loans. By November 1, the amount of clean loans reached 11 million rubles – 7 percent of GDP and more than 14 percent of Russian banks’ debt. Large state-owned enterprises (including Russian Railways, AvtoVAZ, Aeroflot, and Roscosmos) have begun lobbying for special loan terms.

The Governor of the Central Bank, Elvira Nabiullina, has warned that the government will strengthen the economy by financing more loans, which will force her office to maintain the higher the price. In November, the annual inflation rate reached 7.5 percent and shows no signs of slowing down. Something that is slowing down: the growth of the Russian economy. According to the Central Bank, the recovery peaked in the third quarter of 2023.

Problems of the Russian people

The lack of factories and workers will also limit the development of Russian production, said Raiffeisenbank analysts. Stanislav Murashov. In addition, a further increase in the main interest rate will slow down the growth of wages and hinder the work of improving infrastructure in technology. Along with nearly all jobs, the workforce will be redistributed to different sectors, moving workers from areas affected by rising interest rates such as construction, retail, and finance into the business in the military and business of Russia, predicts the chief economist of Bloomberg Economics. Alexander IsakovIt says that future rate hikes will reduce lending and, in turn, consumer demand, raising the risk of another flaw in the next six months to more than 70 percent.

More than 85 percent of companies are facing a shortage of workers, and skilled workers are the most scarce of all. Wages rose 13.2 percent in the first nine months of 2023, and unemployment fell to 2.9 percent (the lowest level in Soviet history), but these impressive figures hide major problems in labor productivity, which fell by 3.6 percent compared to 2021. – the worst drop since 2009. The migration of skilled workers is fleeing from the war and politics, not to mention the participation and death of hundreds of thousands of people in the war, removed from the Russian lake another million or more employees.

While the attack remains the government’s priority, funding for the development of the Russian economy will be reduced through spending on education and health. The longer this continues, the more difficult it will be for the Kremlin to return to solving complex “civilian” problems, and the easier it will be to drag out the war.