The World Bank has recently raised its growth forecast for the Russian economy after revising figures published on Tuesday. According to Global Economic Prospects 2024, Russia’s GDP is expected to grow by 2.9% this year and 1.4% in 2025. This upward revision comes as a pleasant surprise, given that the World Bank had previously projected growth of just 2.2% for 2024 and 1.1% for 2025.
The Russian economy surpassed expectations in 2023, with growth picking up to 3.6. This is a significant increase from the World Bank’s earlier predictions of 2.6% growth made in January and an even more optimistic projection of 1.6% growth made in October.
The upward revision can be attributed to stronger-than-expected private demand, supported by subsidized mortgages, fiscal measures, and a tight labor market. The World Bank also noted that increased military expenditures have played a role in boosting economic activity.
Looking ahead, the World Bank expects the carry-over from strong growth in late 2023 and early 2024 to continue supporting economic activity throughout 2024. However, the anticipated tightening of macroprudential measures and the scaling back of subsidized mortgages are expected to temper private demand.
Another factor that has contributed to Russia’s improved economic performance is its growing trade ties with China. More transactions are being conducted in Chinese yuan, as part of Moscow’s ongoing ‘pivot’ towards the East.
Russian President Vladimir Putin recently highlighted the country’s economic growth during his address at the St. Petersburg International Economic Forum (SPIEF. He stated that Russian GDP expanded by 3.6% last year, bouncing back from a 1.2% downturn in 2022 due to Ukraine-related sanctions. According to Putin, the economy has continued to expand this year, with growth largely driven by non-resource sectors.
In April, the International Monetary Fund (IMF) projected that the Russian economy would grow faster than all advanced economies in 2024, with an expected expansion of 3.2. This is significantly higher than the expected growth rates for the US (2.7%), the UK (0.5%), Germany (0.2%), and France (0.7.
Russian Finance Minister Anton Siluanov has expressed his belief that GDP growth in 2024 will be on par with last year’s levels, while the Bank of Russia has projected it to range between 2.5-3.5.