© Reuters. FILE PHOTO: People walk on a viewpoint at Vorobyovy Gory in Moscow, Russia July 26, 2023. REUTERS/Maxim Shemetov
By Alexander Marrow
(Reuters) – Huge fiscal spending on the military is fuelling short-term economic growth in Russia, but looking at the longer term picture the outlook is “dim”, the International Monetary Fund’s European Director Alfred Kammer said on Friday.
The IMF said this week that significant spending and resilient consumption in a tight labour market would support gross domestic product (GDP) growth of 2.2% this year in Russia, but it lowered its forecast for 2024 growth to just 1.1%.
“We are seeing a considerable fiscal impulse in Russia from ramping up spending related to the war,” Kammer told a press conference at the IMF meeting in Marrakesh that was also broadcast online.
“That is really a short-term impact you are going to see of fuelling growth in the economy,” Kammer said.
“When we look at the longer-term picture on Russia, the outlook is dim because (of) sanctions, because the reduction of (the) technology transfer will hurt the productive capacity and productivity growth in the medium term.”
Russia is throwing resources at its military, with draft budget plans showing defence spending will account for almost one third of all expenditure next year, as Moscow diverts funds from schools and hospitals to finance its “special military operation” in Ukraine.
Kammer said the IMF had downgraded Russia’s potential growth from estimates made before the war started.
“What that means is that Russia has stopped converging towards Western European levels of GDP, so that is quite a change in the outlook of the Russian economy,” Kammer said.
“So, a very different picture when you look at the short-term versus the medium and the long-term prospects.”
Source: Investing.com
