Page 8 - RusRPTDec23

Investment Surge: Investment activity during the third quarter exceeded expectations, also driven by the war, recording an impressive 13.3% growth rate (compared to 10% from January to October). Russian military spending in 2024 will rise to 10% of GDP further driving investment and should bolster economic growth to the point where the economy was overheating in 2023.
However, while the current economic landscape reflects a surge due to a military Keynesianism effect, experts anticipate a slowdown starting in early 2024.
The "Cold Calculation" Telegram channel predicts that GDP growth will decelerate to 0.7% in 2024, as the structural problems like rising inflaton and a very tight labour market, start to make themselves felt.
The zenith of growth is expected to occur in the fourth quarter of 2024, with the subsequent increase in the Central Bank's key rate serving to temper price escalation but that will also take the edge of growth. Rate hikes could elevate the risk of recession to exceed 70% chance in the first half of 2024, say experts.
Russia’s economy is overheating and the central bank has more work to do, The rise in Russian GDP growth to 5.5% y/y in the third quarter was larger than expected and adds to evidence that the economy continued to overheat in 2Q23.
With fiscal policy set to loosen further and inflation pressures to continue building in the coming months, analysts think the central bank will raise interest rates further in 2024.
The strength of activity in 2023 year has been supported by loose fiscal policy and very strong real household income growth, but this has pushed the economy up against supply constraints and caused inflationary pressures to build.
8 RUSSIA Country Report December 2023 www.intellinews.com