The pace of Russia’s economic growth slowed in the second quarter of 2024, official data showed Friday, amid concerns over stubborn inflation and warnings of “overheating”.
Gross domestic product (GDP) grew four percent year-on-year from April to June, according to the Rosstat statistics agency, the lowest quarterly result since the start of 2023, but still a sign that the economy is expanding.
The Kremlin has heavily militarised Russia’s economy since sending troops into Ukraine in February 2022, spending huge sums on arms production and on military salaries.
That spending boom has fuelled economic growth, helping the Kremlin buck initial predictions of a recession when it was hit with unprecedented Western sanctions in 2022.
But it has sent inflation surging at home, forcing the central bank to raise borrowing costs.
Consumer prices rose again in July, with inflation running at an annual rate of 9.13 percent, up from 8.59 percent in June, Rosstat data also showed.
The Central Bank has aggressively raised interest rates in a bid to cool what it has warned is an economy growing at unsustainable rates due to the massive increase in government spending on the Ukraine offensive.
The Russian central bank raised its key interest rate to 18 percent last month — the highest level since an emergency hike in February 2022 took it to 20 percent.
The bank’s governor Elvira Nabiullina said the economy was showing signs of “overheating” and pointed to difficulties with international payments — an effect of Western sanctions — as another factor driving up inflation.
Russia is set to spend almost nine percent of its GDP on defence and security this year, a figure unprecedented since the Soviet era, according to President Vladimir Putin.
Moscow’s federal budget has jumped almost 50 percent over the last three years — from 24.8 trillion rubles ($289 billion) in 2021, before the Ukraine offensive, to a planned 36.6 trillion rubles ($427 billion) this year.
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