Russia’s economy risks overheating despite rebound, say analysts
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Annual data earlier this month showed Russia's economy rebounded sharply from a slump in 2022, jumping 3.6 per cent last year.
However, economists said the growth was boosted by staggeringly high military spending, with war efforts sucking public resources into arms and ammunition production at an unsustainable pace. This puts the economy at risk of major overheating, they said.
International politics Professor Scott Lucas from the University College Dublin’s Clinton Institute said that reports of Russia’s economic resilience are “misleading narratives” that Moscow is continuing to function well as a wartime economy.
“Increasing inflation, cost pressures… are going to be difficult for the economy to absorb in the long term. But (Russia) just keeps trying to produce more and more,” he told CNA's Asia Tonight.
The financial organisation’s managing director Kristalina Georgieva said that with consumption remaining low, growth buoyed by defence spending offers little benefit to ordinary Russians.
RUSSIA’S 2023 REBOUND
Despite the sanctions, there are still customers for Russia’s oil and other commodities.
Some countries are not participating in the sanctions while Russia has also circumvented restrictions by turning to third-party intermediaries.
Export flows from its key oil sector have been redirected to China and India, which together account for around 90 per cent of its crude exports, Russian Deputy Prime Minister Alexander Novak said.
Major American and European brands that pulled out of Russia in droves over the war have been replaced by local companies or firms from so-called friendly states in Asia and the Middle East.
