What's happened
Russia's GDP growth slowed to 4% in Q2 2024, down from 5.4% in Q1, marking the lowest quarterly growth since early 2023. This slowdown is attributed to rising inflation, which reached 9.13% in July, and concerns over an overheating economy due to extensive military spending amid the ongoing Ukraine conflict.
What's behind the headline?
Economic Slowdown
- GDP growth decreased from 5.4% in Q1 to 4% in Q2 2024.
- This is the lowest quarterly growth since early 2023.
Inflation Concerns
- Inflation rose to 9.13% in July, up from 8.59% in June.
- The Central Bank raised interest rates to 18% to combat inflation.
Military Spending Impact
- Heavy military spending has fueled economic growth but also contributed to inflation.
- The Kremlin plans to allocate nearly 9% of GDP to defense this year, the highest since the Soviet era.
Labor Market Challenges
- Labor shortages are exacerbating inflationary pressures.
- The demographic crisis may worsen these shortages, impacting future growth.
What the papers say
According to Huileng Tan from Business Insider UK, Russia's consumer sentiment has reached highs not seen since the 2000s, driven by state spending and labor shortages. However, the Moscow Times highlights that this growth is accompanied by rising inflation and warnings of an overheating economy. The Central Bank's aggressive interest rate hikes reflect concerns over sustainability, as noted in multiple reports. The conflicting narratives suggest a complex economic landscape where growth is tempered by inflationary pressures and demographic challenges.
How we got here
Since the invasion of Ukraine in February 2022, Russia's economy has been heavily influenced by state spending on military activities. Despite facing Western sanctions, the economy initially showed resilience, but recent data indicates rising inflation and labor shortages are now impacting growth.
Go deeper
- What are the implications of rising inflation in Russia?
- How is military spending affecting the Russian economy?
- What demographic challenges is Russia facing?
More on these topics
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Russia, or the Russian Federation, is a transcontinental country located in Eastern Europe and Northern Asia. Covering an area of 17,125,200 square kilometres, it is the largest country in the world by area, spanning more than one-eighth of the Earth's in
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The Moscow Times is an English-language online-only newspaper based in Moscow. It was in print from 1992 until 2017, with a peak circulation of 55,000.
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A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a state or formal monetary union,
and oversees their commercial banking system.