Source: AFP
Russia’s economy grew 5.4 percent in the first quarter of 2024, official statistics showed on Friday, as President Vladimir Putin denied that military spending on the Ukraine offensive had reached unsustainable levels.
The Kremlin has heavily militarized Russia’s economy since sending troops into Ukraine in February 2022, with the massive spending helping to boost growth and soften the blow of Western sanctions.
But it has also fueled inflation and comparisons to the excessive defense spending that plagued the Soviet Union in the 1980s.
Statistics agency Rosstat reported that first-quarter growth was up from 4.9% in the fourth quarter of last year.
Inflation also rose during the month, however, to 7.8%.
On a state visit to China, Putin denied that Russia’s massive military spending — which he said exceeded eight percent of GDP — had reached unsustainable levels.
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“It’s not critical yet. In the Soviet Union in 1985-1986, defense spending was 13 percent” of GDP, he said.
“Given the state of the economy, macroeconomic indicators and budget revenue projections, combined defense and security spending of eight and a bit is not critical,” he added.
Earlier in the week, Putin said Russia’s military spending was a “great resource” that should be used “carefully and efficiently.”
He said on Friday that experts believe Russia’s state finances still have room to cover even greater spending.
Russian troops last week launched a new major offensive in Ukraine’s northeastern Kharkiv region. Putin has signaled that he sees Moscow’s path to victory on the battlefield, overcoming Ukraine and its Western backers.
Inflation problems
Russia’s reorientation of critical energy exports to countries such as China and India has helped it weather Western sanctions that many analysts predicted would push Russia into a deep recession.
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China has become Russia’s most important economic ally in the past two years.
Putin on Friday blamed US efforts to pressure Beijing over its ties to Moscow.
He called US threats to sanction Chinese banks and companies doing business with Russia “illegal” and said lenders in both countries were working to overcome problems with cross-border payments.
The United States has targeted companies in third countries, including China, that it says are helping Russia buy sanctioned products for its military.
While helping to ensure strong growth, Russia’s increased military spending has caused some economic difficulties at home.
Inflation climbed from 7.7 percent to 7.8 percent in April, Rosstat said Friday — above analysts’ expectations and more than the government’s official target of 4.0 percent.
The central bank raised its key interest rate to 16% in a bid to combat rising prices.
And parts of the economy not supported by the attack — such as the service and IT sectors — are facing record labor shortages. Many young men have been conscripted, left the country, or been recruited by the growing arms industry.
Source: AFP