The Russian economy is “overheated”, running at the edge of its capabilities – experts

The Russian economy was noticeably “overheating” and increasingly dependent on the continuation of the war. This is stated in the forecast of the Vienna Institute for International Economic Research (WIIW), published on Tuesday, January 30.

It was noted that the Russian economy, fueled by an arms boom, could no longer continue its rapid growth.

“It is running at its limit and showing increasing signs of overheating,” the forecast said.

According to WIIW, in 2023 the Russian economy will grow by 3.5%. But with high inflation and key bank rates raised to 16%, analysts expect growth to be just 1.5% this year.

“Russia is increasingly dependent on the continuation of the war. Its huge costs act on the economy like a drug. Of course, this will also lead to the corresponding withdrawal symptoms if the dose of the drug is reduced or stopped,” said of WIIW Russia Expert Vasily Astrov.

According to him, by 2024, approximately 29% of Russia’s federal budget will be allocated to armament. Overall, Russia’s defense spending rose to 6% of GDP, the highest level since the fall of the Soviet Union.

High military spending creates dangerous imbalances and undermines medium-term growth prospects, not least because defense companies often outbid civilian companies for scarce skilled labor.

We remind you that inflation in Russia at the end of 2023 will reach 7.4%.

Russian President Vladimir Putin called Russia’s economy “number one” in Europe. According to him, in terms of purchasing power parity, Russians are ahead of all of Europe, but “per capita we still have to try.”