Russia’s economy is expected to grow significantly faster than major developed economies this year, including the US, according to the International Monetary Fund. The country’s war-time economy is forecast to grow by 3.2% in 2024, largely outpacing expected growth for other advanced economies such as Germany, the UK, and Japan. This growth is attributed to high investment and robust private consumption buoyed by wage growth in a tight labor market. However, the IMF anticipates this momentum to slow down in 2025, with a growth rate of 1.8%.
The forecast serves as a wake-up call for Western countries that have been relying on sanctions to hinder Russia’s economy amidst the war in Ukraine. The expected growth rate supports Vladimir Putin’s assertion that Russia’s economy remains resilient despite Western sanctions and trade restrictions. Additionally, amidst the war, foreign companies are fleeing Russia, resulting in Moscow seizing $387 million as of mid-March.
In terms of energy trade, Russia has been able to maintain strong exports by sustaining oil and commodity exports to important markets like India and China. This has been made possible by Russia’s ability to bypass oil price caps set by G-7 countries. Russia’s resilience against Western sanctions is largely due to its strong alliance with China, with trade volume between the two countries reaching a record $240 billion last year. This alliance has been further bolstered by China’s demand for Russian commodities discounted due to Western sanctions.