Russia forecast to grow faster than advanced economies in 2024: IMF

Russia’s economy is expected to grow faster than all advanced economies this year, according to the International Monetary Fund.

Russia is expected to grow 3.2% in 2024, the IMF said in its latest World Economic Outlook released on Tuesday, surpassing growth rates forecast for the United States (2.7%), the Kingdom -United (0.5%), Germany (0.2%) and France (0.7%).

This prediction will be infuriating for Western countries who have sought to economically isolate and punish Russia for its 2022 invasion of Ukraine.

Russia says Western sanctions against its critical industries have made it more self-sufficient and that private consumption and domestic investment remain resilient. At the same time, continued exports of oil and raw materials to countries like India and China, as well as alleged sanctions evasion and high oil prices, have allowed the country to maintain strong oil revenues. oil export.

Russia’s military-industrial complex also expanded significantly during the war, as defense spending and production exploded. In short, Russia has adapted to a “new normal” as its economy has been put on a war footing.

The IMF, however, forecasts that Russia’s economic growth will slow in 2025, falling to 1.8% “as the effects of high investment and robust private consumption, supported by wage growth in a labor market tense work, will fade away.”

The Washington-based IMF includes the United States, the United Kingdom, the largest euro zone economies, Canada and Japan among advanced economies. Russia, China and India remain in the “emerging and developing countries” categories of Europe and Asia respectively.

The IMF chief told CNBC in February that Russia’s economy still faced significant headwinds despite the Fund’s optimistic forecast for the country of about 145 million people.

“What (the growth data) tells us is that this is a war economy in which the state – which, let’s remember, had a very large buffer, built at over many years of fiscal discipline – is investing in this war economy,” said the IMF Managing Director. director Kristalina Georgieva told CNBC’s Dan Murphy at the World Government Summit in Dubai in February.

“If you look at Russia, today production is increasing, (for) the military, (and) consumption is decreasing. And that’s pretty much what the Soviet Union looked like: high level of production, low level of consumption.

Georgieva said she believed the Russian economy also faced challenges from the exodus of skilled workers and “because of the reduced access to technology that comes with…sanctions.”

Bank of Russia Governor Elvira Nabioullina told Russian State Duma lawmakers on April 8 that production in the country was limited by labor shortages, according to Reuters, while noting that the Russian economy continued to grow at an impressive rate.

Last week, Nabiullina was also optimistic about Russia’s inflation rate (at 7.7% in March), saying the peak had been passed, although it was too early to start cutting rates.

The Russian central bank is expected to keep its key rate at 16% at its next rate-setting meeting on April 26, according to a Reuters survey last month. Analysts polled by Reuters expect rates to settle at 12.5% ​​by the end of 2024, Reuters reported last week, well above the 4% inflation target. of the central bank.

After entering his fifth term in office, Russian President Vladimir Putin has pledged to improve living standards in Russia by increasing spending on education, health and public infrastructure. He also signaled that taxes on large corporations and the wealthiest individuals would increase.

— CNBC’s Natasha Turak contributed to this report.