As of: March 27, 2024, 10:01 a.m
By: Bona Hyun
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Press
Split
Sanctions, high government spending, stubborn inflation: there are several factors that will severely slow down the growth of the Russian economy.
Moscow – It won't be long before Russia's economy collapses.
According to the state statistics office Rosstaat, the Russian economy grew by 3.6 percent in 2023 despite sanctions.
But in 2024 there is apparently a weak phase ahead.
According to experts, Russia will not be able to further stimulate the economic growth touted by Vladimir Putin.
Russia's economy is weakening due to sanctions - gloomy forecast for 2024
This is the conclusion reached by scientists from The Bank of Finland Institute for Emerging Economies (BOFIT) in their latest report.
The researchers expect that Russian economic growth will amount to 2 percent in 2024 - in 2025 and 2026 the economy will only grow by one percent.
“Sustained high growth in 2025 and 2026 is very unlikely,” the researchers said about Russia’s economy.
Kremlin boss Vladimir Putin must expect a major setback for Russia's economy in 2024.
© Mikhail Metzel/Pool Sputnik Kremlin/AP/dpa
“With Russia already suffering from severe capacity constraints, growth is expected to slow this year,” it added.
Russian economic growth will be subdued in the coming years and will be driven mainly by government spending.
In the long term, Russia's economy will grow at the expense of its own future.
“Growth miracle” is coming to an end: Russia’s economy is suffering from inflation and the war in Ukraine
Although Putin is probably aware of the disastrous effects of the high military spending on the Ukraine war, he wants to increase it in 2024.
Economists have long predicted that Putin's "war economy" will drive Russia to ruin.
“In order to finance the war effort, the Russian government is prepared to abandon its previous fiscal and monetary policies, which were characterized by conservative fiscal rules and inflation targets,” the scientists also write.
High government spending will make it difficult for Russia to tame stubborn inflation.
According to BOFIT data, Russian inflation was 5.9 percent in 2023, well above the central bankers' target inflation rate of four percent.
Other reports speak of an annual inflation rate of 7.4 percent.
Either way, inflation affects consumer prices.
According to the Russian Central Bank, egg prices have risen by over 40 percent over the past year, fruit and vegetable prices have risen by well over 20 percent, and sugar and meat prices have risen by almost ten percent.
Poorer people in particular suffer from the high prices.
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Western sanctions are having an impact: Russia's economy will shrink
Western sanctions are also weakening Russia's economy.
As a result of the measures, Putin has suffered a massive drop in oil and gas revenues.
In addition, important trading partners are turning away from Russia and want to withdraw from oil deals out of fear of sanctions.
For Putin, this reduces the circle of partners who have purchased Russian crude oil.
The Russian economy will experience further setbacks if it does not get the shortage of skilled workers under control.
According to BOFIT scientists, a significant increase in productivity is required to achieve continuous growth.
However, this goal is more difficult to achieve because the number of young male workers in particular is constantly shrinking.
According to an estimate by the Economic Institute of the Russian Academy of Sciences, Russia would have a labor shortage of almost 5 million by the end of 2023.
(bohy)