Russia's war economy faces tough times ahead, says IMF's Georgieva

Russia's war economy is in for tough times due to the outflow of people and shortages of technology, the International Monetary Fund's managing director Kristalina Georgieva said on Monday, even as high military spending boosts economic growth.

The economy rebounded sharply from a slump in 2022, annual data showed last week, but the growth relies heavily on state-funded arms and ammunition production and mask problems hampering an improvement in Russians' living standards.

Speaking to CNBC, Georgieva said the IMF's forecast of 2.6% gross domestic product (GDP) for Russia this year was a sign that the Russian state, which built up sizeable buffers over many years of fiscal discipline, was investing in the war economy.

Today, she said military production and consumption are going down in Russia.

"That is pretty much what the Soviet Union used to look like - high level of production, low level of consumption," she added.

Speaking to CNBC, Georgieva said the IMF's forecast of 2.6% gross domestic product (GDP) for Russia this year was a sign that the Russian state, which built up sizeable buffers over many years of fiscal discipline, was investing in the war economy.
Today, she said military production and consumption are going down in Russia.

"That is pretty much what the Soviet Union used to look like - high level of production, low level of consumption," she stated.

Russia's economy grew 3.6% in 2023 after a revised 1.2% contraction in 2022.

Russia-based economists have highlighted the poor quality of economic growth, pointing out that missiles and shells may contribute to higher GDP but offer limited benefits to the population.

"I think the Russian economy is (in) for callous times because of the outflow of people and the reduced access to technology that comes with the sanctions," Georgieva said.

Reuters