Is The Russian Economy Growing Or Slowing Down

11th October 2024

Russia's economy is showing signs of slowing down after a period of high growth,

Second and third quarter
Growth in the construction, retail, and services sectors slowed, and industrial output was dragged down by a weak extractive sector.

Inflation
Inflation continued to rise, and the central bank raised its key interest rate to 18% to combat it.

Cooling
Data suggests that the Russian economy is starting to cool, with a fall in retail lending, slowing wage increases, and dropping industrial growth.

However, Russia's economy did experience strong growth in the first half of 2024, due to strong private demand, wage increases, and loan growth.

Some say that Russia's economic success is built on sand, and that the war has caused a number of issues, including:
A dwindling supply of workers
Reduced productivity
Companies cutting capital investments
Consumers spending, not saving

Bank of Finland Institute For Emerging Economies
Russia has posted a stronger-than-expected economic performance in the first half of 2024. Defying our earlier forecast, the capital stock and private consumption grew more rapidly than expected. Accordingly, we have revised upwards our growth outlook to 3½ percent for this year. In the second half of this year, we expect slowdown in economic growth due to Russia's stretched labour supply and production capacity constraints. Russian economic growth should decelerate further in 2025 and 2026 to around 1 % p.a., a level close to the economy's long-term potential growth rate. Higher growth would require a substantial increase in productivity, which seems unlikely given that a considerable share of investment is already dedicated to branches serving the war effort either directly or indirectly. Tighter sanctions have also impaired Russia's access to critical technologies.

Read the full report HERE