IMF’s Georgieva predicts challenging times ahead for Russia’s war economy

Russia’s War Economy: A Growing Concern as Living Standards Falter Despite Military Boost to GDP

Russia’s war economy is facing difficult times, according to the International Monetary Fund’s managing director Kristalina Georgieva. 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.

Georgieva spoke to CNBC about the IMF’s forecast of 2.6% GDP growth for Russia this year, noting that it signifies that the Russian state is investing in the war economy. However, she 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.

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. Despite the seemingly positive 2.6% GDP growth forecast, Georgieva suggested that there is a bigger, less positive story behind it.

The Russian economy rebounded sharply from a slump in 2022, resulting in 3.6% growth in 2023, after a 1.2% contraction the previous year. However, 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.

Georgieva also pointed out that the Russian economy is facing tough times due to

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