Page 72 - RusRPTJun24

In the third quarter of last year, Russia’s GDP grew 5.7%; in the fourth quarter the figure was 4.9%. In the first quarter of this year, according to preliminary data released by the State Statistics Service, it was 5.4%. This quarter it’s running at 4.4%.
Military spending, however, is more than an economic growth hormone. It has also become a mechanism to redistribute wealth. Higher wages, and big payments to soldiers and their families, have significantly improved the financial circumstances of the poorest Russians. According to independent pollster the Levada Center, the number of Russians who have seen a deterioration in the fairness of wealth distribution has almost halved from 45% in 2021 to 25% in November.
The level of output dipped slightly in March (seasonally adjusted) in nearly all core sectors of the economy. In annual terms, output was still up in most sectors, but the pace of growth slowed.
Growth in construction, which has boomed for months, slowed sharply in March to 2 % y-o-y, its lowest level in over two years. Mining & quarrying output remained at the same level as a year earlier. While retail sales continued to show strong growth (11 % y-o-y), part of the effect still reflects last year’s low basis reference.
The on-year pace of manufacturing growth slowed to 6 % in March. Manufacturing, driven by industries linked to the war effort, was the only core sector of the economy to post on-month (seasonally adjusted) growth. After a slight slowdown at the end of last year, military-related manufacturing saw a burst of growth in the first quarter. The role of war-related production in Russia’s current economic performance is discussed in a recent post on our BOFIT blog.
Russia’s economic development ministry estimates that 12-month GDP growth slowed considerably in March from February’s robust figure. February growth was boosted, among other things, by an extra leap-year workday. The economic development ministry and the central bank consider growth in the first months of this year faster than expected and have revised upwards their forecasts for 2024 GDP growth. The economic development ministry now expects GDP to rise by 2.8 % this year and 2.3 % next year. The revised forecast of the Central Bank of Russia sees GDP growth in the range of 2.5–3.5 % this year and 1–2 % next year. Among the most recent international forecasts, the OECD last week announced that it expects Russian GDP to grow by 2.6 % this year and 1 % next year. The averages of major forecasts reported in the April Consensus Economics report were 2.3 % for this year and 1.4 % next year.
The European economy is in a prolonged period of stagnation with low
72 RUSSIA Country Report June 2024 www.intellinews.com