Page 17 - RusRPTAug24

The overheating of the Russian economy is now an accepted fact. Top officials including Central Bank head Elvira Nabilullina, and the head of state-owned banking giant Sberbank German Gref, talk about it openly. Increasingly, it’s only Russian President Vladimir Putin still championing Russia’s high growth as a major achievement without any awareness of the possible downsides. Despite efforts by the Central Bank – particularly high interest rates – it has proved extremely hard to effectively cool the economy. Everyone understands that overly rapid growth in wartime is dangerous, but what exactly is the threat?
What’s going on?
“If we try to drive faster than the car is designed to go, if we stamp on the gas with all our strength, sooner or later the engine will overheat and we won’t get far. The journey might be fast, but it won’t be long,” Nabiullina warned at the end of last year.
In short, overheating means that the economy is operating at its limits, and that productivity is not keeping pace with demand. It is invariably accompanied by rapid economic growth, which means, from the outside at least, it can often appear to be a good thing.
Economic growth in Russia is indeed continuing at a furious pace. Last year, Russian GDP expanded 3.6%, which was above the world average of 3.1%. And in the first quarter of this year, Russia’s economy grew as much as 5.4%. The World Bank has already had to twice upgrade Russian GDP
17 RUSSIA Country Report August 2024 www.intellinews.com