Russia’s war economy is facing tough times, according to the International Monetary Fund’s managing director Kristalina Georgieva. She explained that despite high military spending boosting economic growth, the Russian economy relies heavily on state-funded arms and ammunition production, which masks problems affecting living standards for Russians.
Georgieva spoke to CNBC about the IMF’s forecast of 2.6% GDP growth for Russia this year, noting that it signifies that the Russian state is investing in the war economy. However, she expressed concern that in Russia, military production is increasing while consumption is decreasing, creating a situation similar to what the Soviet Union experienced with high production and low consumption.
Despite a sharp rebound from a slump in 2022, resulting in 3.6% growth in 2023 after a 1.2% contraction the previous year, Russia-based economists have commented on the poor quality of this economic growth. While missiles and shells may contribute to higher GDP, they offer limited benefit to the population.
Georgieva also pointed out that the Russian economy is facing tough times due to the outflow of people and reduced access to technology as a result of sanctions. Despite seemingly positive economic growth forecasts like 2.6%, Georgieva suggested there is a bigger, less positive story behind it.