You hear that, ghost of Dwight D. Eisenhower? The US isn’t the only country with a military-industrial complex. The International Monetary Fund’s latest world economic outlook jacks up the agency’s forecast for Russian GDP growth in 2024 to 2.6%, from the 1.1% it was seeing back in October. That boost comes on the back of all the money Russia is blowing on guns and missiles and the like to help it invade Ukraine.
The IMF says the change reflects “carryover from stronger-than-expected growth in 2023 on account of high military spending and private consumption, supported by wage growth in a tight labor market.”
Sanctions shmanctions
Time was when Russia deciding to invade Ukraine and trying to seize the rest of the country’s territory post-Crimea made it a global economic pariah. Sanctions made doing business there so difficult that corporations were pulling out left and right. Consumers faced shortages of all sorts. Russian billionaires were getting their yachts and soccer teams confiscated around the globe. The country couldn’t even make payments on its bonds, despite having the will and the money.
But because Russia had spent years developing a sanction-proof economic plan dubbed “Fortress Russia” that included moves like building up foreign reserves, cutting debt, and developing alternatives to Western financial systems such as the SWIFT payments network, life with sanctions hasn’t been quite as bitter as Ukraine-supporting governments may have hoped.
Though it remains to be seen how long Russia can keep its heavily restricted economy going—the IMF expects the nation’s GDP growth to slow to 1.1% next year—right now the going is still pretty good. Pierre-Olivier Gourinchas, the IMF’s chief economist, told the Financial Times that “it is definitely the case that the Russian economy has been doing better than we were expecting and many others were expecting.”