Russia’s war economy is facing challenges, according to International Monetary Fund’s managing director Kristalina Georgieva. She mentioned that the outflow of people and shortages of technology are impacting the Russian economy, despite the high military spending that is contributing to economic growth.
The recent annual data revealed a sharp rebound in Russia’s economy, but this growth is heavily reliant on state-funded arms and ammunition production. While the economy has seen a positive trajectory, there are underlying issues that are hindering an improvement in the living standards of Russians.
Georgieva, speaking to CNBC, emphasized that the IMF’s forecast of 2.6% gross domestic product (GDP) for Russia this year indicates significant investment in the war economy by the Russian state. This has led to an increase in military production, while consumption has decreased, resembling the high production, low consumption model of the Soviet Union.
Despite the apparent economic growth, Russia-based economists have pointed out the poor quality of this growth, noting that it is not significantly benefiting the population. Furthermore, Georgieva warned that the outflow of people and reduced access to technology due to sanctions will likely lead to tough times for the Russian economy.
In summary, while the 2.6% GDP growth may seem positive, Georgieva stressed that there are greater challenges and issues at play that could have long-term negative effects on the Russian economy.