According to the OECD, the Russian economy should start growing again in 2025 at the earliest.
(Photo: dpa)
Moscow The Russian economy shrank in the war year 2022 due to Western sanctions. The gross domestic product was 2.1 percent lower than in 2021, the Rosstat statistics office said on Friday in Moscow. According to the information, growth of 3.0 percent was still enough in the first quarter, but then it went downhill – most recently by 2.7 percent in the fourth quarter. According to a forecast by the OECD, the organization of industrialized nations, Russia, which is at war with Ukraine, will not return to growth until 2025 at the earliest. Accordingly, the economy will shrink by 2.5 percent in the current year and then by another 0.5 percent in 2024.
A major economic slump was prevented last year by the sharp rise in armaments spending. These totaled 5.41 trillion rubles (a good 62 billion euros), exceeding the original plan by 54 percent, according to calculations by the independent Gaidar Institute based in Moscow. This corresponds to 17.4 percent of total household expenditure. The central bank also took countermeasures by initially preventing a fall in the ruble with a sharp interest rate hike and then lowering its key interest rate again to 7.5 percent in order to boost the economy.
According to the European rating agency Scope, the high armaments spending will have a long-term negative impact on the Russian economy, as it was at the expense of investments in infrastructure, digitization, housing construction and environmental protection. The long-term growth potential is likely to be only 1.0 to 1.5 percent and thus far below that of other large emerging countries such as China or India.
In the first quarter just ended, the Russian state budget slipped deep into the red due to high armaments spending and falling income from energy exports. From January to March it was 2.4 trillion rubles (26.5 billion euros), according to the Ministry of Finance in Moscow. For comparison: in the same period of 2022, a surplus of 1.13 trillion rubles was achieved. Revenues in the past quarter fell 20.8 percent year-on-year to 5.7 trillion rubles, while expenses rose 34 percent to 8.1 trillion rubles.
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