Russia expects faster growth than advanced economies in 2024: IMF says

The Russian economy is expected to grow faster than all advanced economies this year, according to the International Monetary Fund.

Russia is expected to grow 3.2% in 2024, the IMF said in its latest World Economic Outlook released on Tuesday, outpacing forecast growth rates for the United States (2.7%), United Kingdom (0.5% ), Germany (0.2%) and France (0.7%).

The prediction will rankle Western nations that have sought to economically isolate and punish Russia for invading Ukraine in 2022.

Russia says Western sanctions on its critical industries have made it more self-sufficient and that private consumption and domestic investment remain resilient. Meanwhile, continued exports of oil and raw materials to countries such as India and China, as well as alleged sanctions evasion and high oil prices, have allowed the country to maintain robust oil export revenues.

Russia’s military-industrial complex also expanded significantly during the war, as defense spending and production soared. In short, Russia has adapted to a “new normal” as its economy has been put on a war footing.

The IMF forecast that Russia’s economic growth would moderate in 2025, but fall to 1.8% “as the effects of high investment and robust private consumption, supported by wage growth in a tight labor market, fade.” .

The Washington-based IMF includes the United States, the United Kingdom, the major eurozone economies, Canada and Japan as advanced economies. Russia, China and India remain in the “emerging and developing” categories of Europe and Asia respectively.

The head of the International Monetary Fund told CNBC in February that Russia’s economy was still facing significant difficulties despite the Fund’s rosy forecast for the country of about 145 million people.

“What [the growth data] tells us is that this is a war economy in which the State – which, let’s remember, had a very considerable buffer, built up over many years of fiscal discipline – is investing in this war economy,” said the director general of IMF Kristalina Georgieva to CNBC’s Dan Murphy at the World Governments Summit in Dubai in February.

“If you look at Russia, today production increases, [for the] military, [and] consumption drops. And this is more or less what the Soviet Union looked like. High level of production, low level of consumption.”

Georgieva said she believes the Russian economy also faces challenges related to the exodus of skilled workers and “due to reduced access to technology resulting in… sanctions.”

Bank of Russia Governor Elvira Nabiullina told Russian State Duma lawmakers on April 8 that production in the country is limited by a shortage of workers, according to Reuters, although she noted that the Russian economy continues to grow at a impressive pace.

Last week, Nabiullina also sounded a note of optimism about Russia’s inflation rate (at 7.7% in March), saying she believed the peak had passed, although it was too early to start cutting rates.

Russia’s central bank is expected to keep its key rate at 16% at its next rate-setting meeting on April 26, according to a Reuters poll last month. Analysts polled by Reuters expect rates to stand at 12.5% ​​by the end of 2024, Reuters reported last week, well above the central bank’s inflation target of 4%.

At the start of his fifth term, Russian President Vladimir Putin promised to raise living standards in Russia by increasing spending on education, healthcare and public infrastructure. He also signaled that taxes on larger companies and the wealthiest individuals will increase.

— CNBC’s Natasha Turak contributed to this report.