Russia has raised its economic growth forecast for 2024 to 3.9%, a significant increase from earlier estimates, reflecting stronger-than-expected performance in the first half of the year. This upward revision comes as the Russian economy continues to demonstrate resilience despite facing challenges from Western sanctions and difficulties in international payments.
Boost from State Spending and Capital Investment
Finance Minister Anton Siluanov announced the new forecast on state television, highlighting the role of increased state spending and fiscal stimuli in driving the economy forward. “We see that the economy is developing at a faster pace than experts had expected,” Siluanov said. He noted that the fiscal measures implemented in recent years and in 2024 have contributed to this growth.
The previous estimate for Russia’s economic growth in 2024 was 2.8%. In comparison, the economy grew by 3.6% last year. The new forecast is based on strong economic data from the first half of 2024, which showed a 4.6% growth compared to 1.8% in the same period last year.
Strong Capital Investment as a Key Driver
One of the major factors contributing to this growth is robust capital investment, particularly from the private sector. In the second quarter of 2024, capital investment increased by 8.3% year-on-year, reaching 8.44 trillion roubles. This follows a remarkable 14.5% growth in the first quarter, indicating sustained investor confidence in the Russian economy.
Balancing Growth with Inflation Concerns
While the strong growth numbers are encouraging, the forecast also suggests that the pace of growth may slow in the second half of the year. This deceleration is seen as a necessary measure to prevent the economy from overheating. The Central Bank of Russia raised its benchmark interest rate to 18% in July, the highest level in over two years, to combat inflationary pressures.
Resilience Amid Sanctions and International Challenges
Despite the ongoing challenges posed by Western economic sanctions and issues with international payments, particularly with major trading partners like China, the Russian economy continues to hold up well. The growth, driven partly by increased military production, reflects the country’s ability to adapt to external pressures.
