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Ukraine started, Russia’s economic growth was well behind that of the global average and close to stagnation. However, following the invasion of Ukraine in 2022, the economy has been enjoying a military Keynesianism boost and is currently the fastest growing of any major economy in the world.
And Russia has overtaken Japan ahead of schedule. Putin explicitly set his government the goal of attaining fourth place among the world's largest economies in terms of PPP earlier this year, and the Cabinet was instructed to prepare measures to achieve this goal by March 31, 2025.
By breaking off relations with the West Putin has made a big bet on the Global South Century, where most of the developing world countries are growing much faster than the West. Currently China and India are in the number one and three slots in the global ranking in PPP terms but both are expected to become the leaders in nominal terms as well over the next three or four decades. Most of the fastest growing economies from lower down the list are also from the Global South.
As bne IntelliNews has extensively reported, Russia has changed its economic model and after decades of austerity began to invest heavily, spurring growth in a new Putinomics. At the same time as investment is pouring into the military industrial complex, Putin has also launched the National Projects 2.1 programme to invest into the civilian economy as well and improve the quality of life for the average Russian, as he made clear in his recent guns and butter speech. And the war is proving to be a boon for Russians, as Russia’s poorest regions have been the biggest winners and as bne IntelliNews recently reported, the country’s despair index has fallen to its lowest level ever this year – the sum of inflation, unemployment and poverty.
As a result of these changes, economists estimate that Russia’s growth potential has increased from 1-1.5% pre-war to around 3.5% now. Last year, Russia’s economic growth caught analysts off guard with a 3.6% expansion. This year the World Bank has already almost trebled its forecast for growth from 1.1% to 3.2%. Russia’s Economic Ministry is similarly bullish.
Even the World Bank’s PPP adjusted size of the economy may be an underestimate. The World Bank also estimates that 39% of Russia’s economy is in the shadows, while the shadow economy only makes up 10% of Japan’s economy, which would add an additional $2.5 trillion to Russia’s $6.4 trillion PPP adjusted economic size – still not enough to overtake India’s $14.6 trillion PPP adjusted GDP value, but widening the gap with Japan further.
2.2 Russia’s economic elite map out policy for 2024
The main event of the second day of Russia’s annual St Petersburg International Economic Forum (SPIEF) on June 6 was the closely watched economic session, featuring key Russian economic elite that actually run Russia’s economic policy.
This session usually provides insights into the country's economic strategies and challenges. At last year’s session, Russian Finance Minister Anton
9 RUSSIA Country Report July 2024 www.intellinews.com