© Reuters. A vendor distributes candies at a food market in Saint Petersburg, Russia, November 10, 2023. REUTERS/Anton Vaganov/File Photo
According to the International Monetary Fund’s managing director Kristalina Georgieva, Russia’s war economy is set to face difficult times ahead due to factors such as population outflow and technology shortages. Despite a rise in economic growth driven by increased military spending, underlying issues persist that hinder improvements in the standard of living for Russians.
The latest annual data indicates a sharp recovery in the economy following a downturn in 2022, but the growth is heavily dependent on state-backed production of arms and ammunition. This reliance on military production masks underlying challenges and impedes the enhancement of living standards for the population.
In an interview with CNBC, Georgieva highlighted the IMF’s GDP forecast of 2.6% for Russia this year as evidence of the country’s investment in the war economy. She noted that the current situation in Russia mirrors the historical pattern of high production levels and low consumption, reminiscent of the Soviet Union era.
The Russian economy saw a growth of 3.6% in 2023 following a revised 1.2% contraction in 2022. However, economists based in Russia have pointed out the limited benefits to the population from the production of missiles and shells, emphasizing the poor quality of economic growth.
Georgieva expressed concern about the challenges ahead for the Russian economy, attributing this to the outflow of people and reduced access to technology as a result of sanctions. Despite the seemingly positive GDP growth figure, she cautioned that there is a larger underlying issue that paints a less optimistic picture for the economy.