The International Monetary Fund has raised its 2024 growth forecast for Russia due to increased government spending on the ongoing war, acting as a strong economic stimulus. Meanwhile, the IMF has lowered its outlook for Ukraine, which has faced significant economic challenges and infrastructure damage during the conflict.
In its latest forecast, the IMF predicts a 3.6% growth for the Russian economy in 2024, up from the previous forecast of 3.2%. However, the growth forecast for next year has been reduced from 1.5% to 1.3% due to emerging economic issues.
Russia’s Central Bank has cautioned against the risks associated with excessive military spending, noting that the economy has been showing signs of overheating for months. Factors such as high inflation and labor shortages are also posing challenges for Moscow.
President Vladimir Putin recently acknowledged that Russia’s record low unemployment rate of 2.4% could limit the country’s growth prospects. To combat inflation, the Central Bank has raised interest rates to 19% and might further increase them. Additionally, the Finance Ministry has proposed a nearly 30% hike in military spending for next year.