Defense industry is booming
Russia’s finance minister expects stronger growth
08/26/2023 4:51 p.m
After the attack on Ukraine, Western sanctions ensure that the Russian economy collapses. But the economy is recovering quickly. This year, the government in Moscow is expecting even faster economic growth than previously assumed.
According to Finance Minister Anton Siluanov, Russia’s gross domestic product (GDP) will grow much faster this year than previously assumed. “We expect the economy to recover by 2.5 percent this year, maybe more,” he said in a television interview, according to the Interfax news agency. Last year, GDP in Russia officially fell by 2.1 percent after the outbreak of the war of aggression against Ukraine ordered by Kremlin chief Vladimir Putin.
The official growth forecast for 2023 by the Ministry of Economic Affairs in April is 1.2 percent. In the meantime, however, both President Putin and Prime Minister Mikhail Mishustin have expressed more optimism, saying that growth could exceed 2 percent. International organizations such as the International Monetary Fund and the World Bank are also forecasting significant growth for the Russian economy this year.
However, the informative value of the current growth figures for the economy as a whole is limited. Many branches of the economy are lying idle in Russia – partly because of the sanctions. Others, such as the armaments industry, but also the textile and food industries are working at full capacity. Economist and Russia expert Vasily Astrov from the Vienna Institute for International Economic Studies attested to the “really impressive development” of the Russian economy. She adapted to the sanctions “surprisingly quickly”. Real wages, especially in the lower income brackets, have recently risen.
According to Siluanov, inflation will level off at around six percent by the end of the year. In the next few years, however, it should return to the target of around four percent, he said. Inflation has also been boosted by the ruble’s slide in recent months. The Russian reserve currency has lost massively in value against the euro and dollar. One euro now costs more than 100 rubles. This has made necessary imports significantly more expensive.