The International Monetary Fund on Tuesday boosted its 2024 growth forecast for Russia, with massive government spending on the offensive in Ukraine providing a powerful economic stimulus.
The organisation also slashed its outlook for Ukraine, whose economy and infrastructure has been battered by the two-and-a-half-year conflict.
Both countries are spending huge sums to fight the conflict, with Moscow’s outlays having helped the economy grow strongly despite a barrage of Western sanctions.
In its latest set of forecasts, the IMF said it expects the Russian economy to expand by 3.6 percent in 2024, up from a previous forecast of 3.2 percent.
But it cut its prediction for next year’s growth from 1.5 percent to 1.3 percent, amid signs of mounting economic problems.
Russia’s central bank has repeatedly warned of the dangers of the government’s military spending, saying the economy has been “overheating” for months.
High inflation — 8.6 percent in September — and intense labour shortages are also posing economic headaches for Moscow.
In a rare move, President Vladimir Putin acknowledged earlier this month that Russia’s record low unemployment of 2.4 percent was a “limiting factor” for the country’s growth prospects.
The central bank has raised rates to 19 percent in a bid to bring inflation under control and could increase them again at a rate-setting meeting on Friday.
Russia’s finance ministry has proposed to raise military spending next year by almost 30 percent to around $145 billion, with combined defence and security spending set to account for approximately 40 percent of state expenditure.
The IMF also cut its outlook for the Ukrainian economy, which could be about to face its toughest winter of the conflict so far.
It forecast growth of 3.0 percent this year, down from an April prediction of 3.2 percent, and downgraded its outlook for next year’s expansion from 6.5 percent to 2.5 percent.
Russian bombardments have caused tens of billions of dollars worth of damage to Ukrainian infrastructure and forced around a third of the population to flee their homes — millions leaving the country entirely — according to the UN.
Kyiv is reliant on financial support from Western backers and international organisations like the IMF to keep its economy afloat and support daily government spending.
Ukraine plans to allocate more than 60 percent of its entire state budget to defence and security next year.
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