According to the International Monetary Fund’s managing director Kristalina Georgieva, Russia’s war economy is facing difficult times due to a combination of factors. She explained that 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. Georgieva also pointed out that the Russian economy is facing tough times due to the outflow of people and reduced access to technology as a result of sanctions. Despite the seemingly positive 2.6% GDP growth forecast, she suggested that there is a bigger, less positive story behind it.