Russia’s Economy is Buzzing from War Spending

The International Monetary Fund boosted its 2024 expectations for the country’s economic growth.

Photo of Russian flag in a crowd of people
Photo by Klaus Wright via Unsplash

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War? What is it good for? Absolutely nothing. Except for the economy, even Russia’s. 

Two years into Vladimir Putin’s invasion of Ukraine, full-scale war is bearing fruit for the Russian economy. On Tuesday, the International Monetary Fund upgraded its 2024 outlook for the nation, forecasting its GDP to increase by 2.6% this year — good for double previous projections and a larger upward revision than any other country in the report. Unfortunately, the cost has already included 315,000 dead or injured Russian soldiers, according to a recently declassified US intelligence report.

Sanctions Fall Short

Much of the Western world slapped Russia with a series of steep sanctions after the invasion, with restrictions in particular placed on Russian oil exports. But Putin’s aggressive war-time spending has stimulated the economy nonetheless, propping up commodities prices and making up for shortfalls in energy-related export revenues. 

That was enough for most economists to gauge Russia’s GDP growth last year at around 3% — as well as for the IMF to increase its expectations for Russia’s economy in the remaining 11 months of 2024:

  • The IMF’s projection of 2.6% GDP growth this year comes just after the organization had predicted a slightly more anemic growth rate of just 1.1% in October.
  • It’s also a projection more bullish than many Russian insiders have made. In November, Russia’s central bank predicted growth of up to just 1.5% this year, while the economy ministry has pegged the figure at 2.3%.

“It is definitely the case that the Russian economy has been doing better than we were expecting and many others were expecting,” IMF chief economist Pierre-Olivier Gourinchas told the Financial Times.

New World Order: In fact, the IMF’s rosy outlook extends beyond Russia. In its report Tuesday, the organization also upgraded its outlook for both the US and China, pointing to inflation’s faster-than-expected cooling. Gourinchas told reporters it is evidence that “the chance of a ‘soft landing’ has increased.” He also added that “the biggest global election year in history” — with roughly half the world’s population voting in major elections across roughly 64 countries — could boost economic activity. Political wars are good for economies, too, we take it.