Page 4 - Russia OUTLOOK 2024

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Executive summary
Russia’s economy defied all expectations in 2023 by not only not collapsing but by being the fastest growing country in Europe by the end of 2023.
The economy in 2023 surpassed its 2021 levels, with GDP registering notable increases. In October alone, GDP exhibited a year-on-year growth of 5% in November following 5.6% growth in September, according to official figures.
Independent assessments from Bloomberg Economics echo these figures. Their analysis suggests that an annual growth rate of 5-5.5% in the total output of non-financial sectors during the fourth quarter is indicative of an overall economic growth rate of 3-3.5% for the entire year, ahead of the official forecast for 2.2% growth for 2023.
“All is not well with the Russian economy and the sanctions imposed by the West after Russia’s full-scale invasion of Ukraine are working – just not as fast as Western politicians would like. The Russian economy is gradually returning to what it looked like in the late Soviet period or even NEP (New Economic Policy) in 1920s: while the consumer market was dominated by private enterprise, almost everything else – including foreign trade – was largely controlled and calibrated by a Kremlin seeking to boost defence output and ensure social stability,” says Alexandra Prokopenko, a political economy analyst.
Overheating will cause problems in 2024, but won’t cripple the government. The Kremlin has used up all the slack in the economy. There are no more reserves to increase supply in the economy. Therefore growing demand will only lead to higher prices. And overheating may lead to unrealistic optimism – on behalf of households and companies – about future income prospects, resulting in more borrowing. Such a trend is already visible in the mortgage sector.
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