In an interview with CNBC, Kristalina Georgieva, the managing director of the International Monetary Fund (IMF), discussed the challenges facing Russia’s war economy. She expressed concern that high military spending has boosted economic growth, but that the Russian economy relies heavily on state-funded arms and ammunition production, which masks problems affecting living standards for Russians.
Despite a 2.6% GDP growth forecast for Russia this year, Georgieva pointed out that it signifies a significant investment in the war economy. However, she noted that military production is increasing while consumption is decreasing, creating a situation similar to what the Soviet Union experienced with high production and low consumption.
Russia-based economists have commented on the poor quality of this economic growth, emphasizing that while missiles and shells may contribute to higher GDP, they offer limited benefit to the population. Georgieva also highlighted that Russia’s economy is facing tough times due to the outflow of people and reduced access to technology as a result of sanctions. Despite these challenges, she suggested that there is a bigger story behind Russia’s seemingly positive 2.6% GDP growth forecast.