Russia’s war economy is facing difficult times due to a combination of factors, including the outflow of people and shortages of technology, according to the International Monetary Fund’s managing director Kristalina Georgieva. She explained that high military spending has boosted economic growth, but the Russian economy relies heavily on state-funded arms and ammunition production, which masks the problems that are affecting living standards for Russians.
Despite the seemingly positive 2.6% GDP growth forecast, Georgieva 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. She 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.
Russia-based economists have commented on the poor quality of this economic growth, emphasizing that while missiles and shells may contribute to higher GDP, they offer limited benefit to the population. The economy in Russia rebounded sharply from a slump in 2022, resulting in 3.6% growth in 2023, after a 1.2% contraction the previous year. However, these figures do not paint a full picture of the challenges faced by Russia’s war economy.