Far from being paralyzed after two and a half years of war, the Russian economy is still growing this year. GDP is expected to increase by 3.2% in 2024 according to the IMF.
“We have growth and they have decline,” Vladimir Putin declared in January. A few months later, the first part of his sentence seems to be coming true. Russia’s gross domestic product is expected to grow by 3.2% this year, “significantly more than in the United Kingdom, France and Germany,” the IMF points out.
The epicenter of this growth lies in industry. Since the beginning of the invasion in Ukraine, the state has invested massively in the field of defense and in particular in the production of weapons. Salaries have been increased to attract labor. In short, the war economy has helped to support household incomes and therefore consumption. A situation that allows the head of the Kremlin to recall that his economy is resisting sanctions.
For its forecasts, the IMF is counting on “the maintenance of two factors: that of military expenditure at a high level which stimulates all consumption and stable prices for Russian hydrocarbons, therefore significant budgetary revenues”, according to researcher Tatiana Kastoueva-Jean.
In July, the World Bank placed Russia back on the list of “high-income” countries for the first time since 2014.
Raging inflation
International sanctions have not led to shortages in Russian stores. Supermarket shelves are full, but prices are high. They rose 8.6% in June over the past year and this is expected to continue. In an attempt to curb this galloping inflation, the Russian central bank has finally recently raised its key rate, from 16% to 18%.
The country is also facing labor shortages in many sectors not directly related to defense. Yet many analysts agree that Vladimir Putin would have no interest in getting out of this macabre economy for the time being.
The Kremlin invests a lot of money in recruiting soldiers
The government is constantly recruiting new men by offering very high sums of money. According to the authorities, about 200,000 Russians have volunteered in the first six months of 2024.
And to further entice, Vladimir Putin doubled the monthly bonus paid to recruits to 400,000 rubles, or 4,000 euros. Volunteers also receive bonuses for participating in offensives or destroying enemy tanks and other weapons.
This income is tax-free and sometimes comes with privileges such as access to prestigious universities in the country without entrance exams and even preferential rate mortgage loans.
Caroline Loyer: Russia, the good health of the war economy – 10/09
Moreover, the amount of the death bonus can be as high as 11 million rubles, depending on the region. That’s more than 100,000 euros. Except that for families to receive this sum, the remains must have been recovered, and that’s not always the case. About a third of dead soldiers are not identified. In the columns of Le Monde, Russian economist Vladislav Inozemtsev speaks of an “economy of death.”
“Russians have always been sent to the army under duress or out of patriotism. Vladimir Putin has created a completely new reality,” he says.
Today, signing a contract with the army means ensuring that you earn ten times the minimum wage.
