Page 6 - RusRPTJul23

1.0 Executive summary
Russia’s economy is currently growing about 0.6% a quarter, never mind a country that has been hit by over 13,000 sanctions. As sanctions have isolated Russia from the global financial system it is much better protected from external shocks and — barring a catastrophic event — Putin’s prediction is likely to not be far from the mark.
In the first quarter of this year, Russian GDP contracted 1.9% compared with the equivalent period last year. At the same time, seasonally-adjusted disposable income for Russians ticked up 0.1%. This is similar to other periods in the post-Soviet economy (notably in the 2000s and between 2010 and 2013) when citizens grew wealthier at a faster rate than the economy. Russia’s economy is enjoying a military-driven Keynesian bump.
Military spending is one of the main expenses for Russia this year. Expenditure on “national defence” and “national security” is set to exceed 9 trillion rubles (6.2% of GDP), almost a third of total spending. Even so, this is not much for a country at war: at the height of the Vietnam War, US military spending was 9.7% of total spending, during the most expensive period of the arms race in the mid-80s it hit 6.8% and, during military operations in Iraq and Afghanistan, it was at roughly the level we see in today’s Russia.
The money Russia has earmarked for this year is being spent extremely rapidly: in the first five months of the year, almost 60% of defence spending and almost 40% of security spending had already been carried out (this data comes from open sources — but on Wednesday the Finance Ministry announced it was ceasing publication of such information). In addition, there is a huge amount of construction underway in the Russian-occupied areas of Ukraine, which is all heavily subsidized. As much as 88% of the spending by the Russian-installed administrations in the four Ukrainian regions annexed by Russia last year is from Moscow, according to Ilya Tsypkin, an expert at Russian credit rating group ACRA.
The defence sector has grown 25% between January and April, according to a recent Rosstat report.
As well as supporting the economy, rising military expenditure also increases incomes. Official figures show that real incomes are rising fastest in regions with significant military industries, or from where there are large numbers of soldiers (Buryatia, Chechnya, the Jewish Autonomous Region, etc).
Average incomes in the last quarter of 2022 grew faster among the poor — the higher the income bracket, the slower the salary increases have been.
Russian President Vladimir Putin has no doubt that in the coming years Russia will retain the sixth place in the world in terms of gross domestic product,
6 RUSSIA Country Report July 2023 www.intellinews.com