The growth of Russia’s capital stock and private consumption has accelerated more than expected, estimates the Bofit research unit of the Bank of Finland.
Bofit, the research institute for emerging economies of the Bank of Finland, presents a forecast of the development of the Russian economy twice a year. OUTI LAKE
At the beginning of 2024, economic growth in Russia has been faster than expected, estimates Bofit, the Bank of Finland’s research institute. The growth of private consumption tightens the economy. Consumers in Russia are enjoying big salary increases. Lending is also growing rapidly despite the high interest rate.
The rapid growth of government spending will spur growth during the first half of the year. The Bank of Finland expects growth to slow down at the end of the year, but thanks to the soaring growth at the beginning of the year, growth of around 3.5 percent will also remain for the rest of the year.
In the years 2025–2026, economic growth will slow down significantly and reach only about one percent per year. The effects of the Russian war of aggression have a debilitating effect on growth.
In 2026, according to the forecast, direct defense spending will be around 6.2 percent of GDP. In addition, Russia’s National Welfare Fund has significant funds to cover higher-than-expected defense spending.
Most of Russia’s investments are directed to sectors that serve the needs of the war. The tightening of sanctions limits the availability of technology.
The volume of Russian exports is expected to remain at the same level during the years 2024–2026. The main export products, such as oil, are in demand and the main partners, China and India, are not expected to reduce their purchases of Russian energy.
Imports to Russia have shrunk significantly due to the sanctions and the payment difficulties caused by them.
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