Before the presidential election, 7 facts about Russia's economy under Vladimir Putin – Firstpost

Vladimir Putin is about to run for another term as president. Source: Reuters file

Russian President Vladimir Putin appears poised to achieve an unprecedented feat in the country's history: a fifth six-year term as head of state. His victory in the upcoming presidential elections from March 15 to 17 is considered predetermined. The international focus is on the war in Ukraine. In Russia, however, the economic situation is weighing heavily on citizens' minds.

This raises the question: What is the truth about the Russian economy before the elections?

1. What the GDP numbers show

Data released by Rosstat in February showed that Russia's real gross domestic product (GDP) grew by 3.6 percent last year. This growth is largely due to record increases in government spending (particularly on military equipment) and generous payments to volunteer soldiers.

In a future outlook report published at the end of January, the International Monetary Fund (IMF) increased its forecast for the country's economic growth rate for 2024 from 1.1 percent to 2.6 percent.

However, the numbers obscure a differentiated picture.

2. War-related industries grow, but others perform worse

Allianz, an international financial services provider, said in a recent report: “Russia's economic outperformance reflects the reallocation of resources to war and masks the underperformance of the rest of the economy.” On the supply side, growth in 2023 was largely driven by strong expansion in Industries related to war, construction and retail were boosted […] On the other hand, production in the automotive and aviation sectors in 2023 was well below pre-war levels.”

3. Oil export revenues stable, but risks remain

Revenues from the Russian oil and gas industry accounted for 30 to 50 percent of total federal budget revenues over the past decade. On average, the country's oil and gas sector accounts for about 20 percent of its GDP, according to a report from the Oxford Institute for Energy Studies.

While sanctions imposed by the West caused Moscow to lose its lucrative natural gas market in Europe, it didn't take long for new buyers to partially fill that vacuum. After boycotts, Russia's oil exports shifted from European countries to the fuel-guzzling Asian giants: China and India.

In January alone, Russia earned around $15.6 billion (or $500 million per day) in oil export revenue, ` reported, citing the Kyiv School of Economics' Russian Oil Tracker.

Janis Kluge, an expert on the Russian economy at the German Institute for International Politics and Security, told the publication that Russia could maintain its high spending on military and social programs “indefinitely” as long as oil prices remain stable.

There is a risk of a sharp decline in the price of Russian oil, which is already trading at a discount of around $13 per barrel compared to the international benchmark Brent crude oil.

4. The tight labor market leads to low unemployment

Due to the tense situation on the labor market, unemployment rates in Russia are low. Thousands of men signed military contracts with Ukraine at the start of the war. Thousands more left the country to avoid mobilization. According to the `, these two developments have left companies facing labor shortages.

5. Construction industry is booming – at what cost?

Government-subsidized mortgages and high wages not only support home buyers, but also the construction industry. The present is beautiful, but the big bill for the Putin government's largesse will eventually hit hard.

6. Inflation, interest rates still high

Inflation in Russia is over 7 percent, well above the central bank's target of 4 percent. However, these elevated levels are nothing new, ` reported.

To curb inflation, the Central Bank of the Russian Federation has raised interest rates to a whopping 16 percent.

7. Food and energy security guaranteed

The good news for Russians is that the country has become much more independent in meeting its food needs since taking over Ukraine's Crimean peninsula in 2014. The Putin government has also taken steps to keep fuel prices under control. This primarily includes a six-month ban on gasoline exports, which came into force on March 1st.

With input from agencies