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Russia reported strong economic growth for 2024 on Friday as record spending on the military offensive against Ukraine outweighed the impact of Western sanctions.<\/p>\n
Moscow’s massive ramp-up in outlays on soldiers and weapons has helped it defy predictions of a deep recession after it launched its military campaign in February 2022.<\/p>\n
But fast growth has triggered high inflation and deep labour shortages at home, worrying the Kremlin.<\/p>\n
The economy expanded by 4.1 percent in 2024, Prime Minister Mikhail Mishustin told Russian President Vladimir Putin in a televised meeting, citing data from the Rosstat statistics agency.<\/p>\n
That was the same as the pace of growth in 2023, Mishustin said — revising up the previous figure of a 3.6 percent expansion for that year.<\/p>\n
– ‘Good result’ –<\/p>\n
Putin hailed the economic performance, but ordered Mishustin to get a grip on rising prices.<\/p>\n
“Overall, the result is good,” Putin said.<\/p>\n
“The task for the current year is to reach a more balanced growth trajectory and achieve a reduction in inflation,” he said.<\/p>\n
Mishustin said it was “absolutely clear that the main challenge is inflation”, which came in at 9.5 percent last year.<\/p>\n
Surging prices for staple goods have become headline news in state media — usually uncritical of the Kremlin — in recent months.<\/p>\n
The cost of butter rose 36 percent in 2024, the Rosstat statistics agency said, with overall food prices more than 11 percent higher.<\/p>\n
Prices have been pushed higher by a rapid increase in state spending amid the Ukraine offensive.<\/p>\n
State expenditure is set to be two-thirds higher in 2025 compared to 2021, before Russia’s military offensive.<\/p>\n
Putin said last year that Moscow is spending almost nine percent of its GDP on defence and security.<\/p>\n
– Slower growth forecast –<\/p>\n
Russian officials and economists say the economy is set to slow this year.<\/p>\n
A survey of analysts by the central bank published this week showed expectations are for a 1.6 percent expansion in 2025.<\/p>\n
“Perhaps there will not be such significant growth of the economy in the following year, but it is very important to stop inflation,” Mishustin told Putin.<\/p>\n
After warning for months the economy was “overheating”, the central bank said this week that growth was set to return to “more sustainable rates”.<\/p>\n
It has raised interest rates to a two-decade high of 21 percent in an attempt to bring inflation under control and cool the economy, but rising borrowing costs have caused anger among businesses and households.<\/p>\n
The West had hoped sanctions would collapse Russia’s economy and thwart Moscow’s ability to fund its military offensive.<\/p>\n