Russian Economy Grew by 4.1% YoY in 2024
Bottom Line: According to the figures announced by the Russian State Statistics Service (Rosstat) on February 7, Russia's GDP expanded by 4.1% YoY in 2024 driven by strong military spending, higher wages and fiscal stimulus. We envisage growth to hit 1.6% in 2025, which is significantly less than 2024 figure, as we foresee a ceasefire in Ukraine in 2025 that will likely lower Russia’s military spending and fiscal stimulus.
Figure 1: GDP Growth (%, Annual), January 2023 – December 2024
Source: Rosstat
Russian economy continued its strong growth pattern in 2024, and grew by 4.1% YoY backed up by fiscal stimulus, strong military spending and consumption. Rosstat announced that Russia's GDP for 2024 amounted to 200 trillion 39.5 billion RUB in current prices (approximately $2.05 trillion). Rosstat has not yet published a Q4 2024 GDP estimate but plans to do so in April. (Note: Rosstat also revised growth for 2023 to 4.1% from 3.6%).
According to the Rosstat’s announcement on February 7, household and government consumption accounted for 68.8% of Russian GDP in 2024, up from 68.4% in 2023. Rosstat said that household consumption accounted for 49.7% of GDP in 2024, up from 47.6% a year earlier while investments expanded to 23.6% from 22.3%. Net exports fell to 3.8% of GDP in 2024 from 4.2% in 2023.
Speaking about 2024 growth print, prime minister Mishustin said on February 7 that the economy grew slightly better than the official forecast of 3.9%. Mishustin indicated that industrial production has been a key driver of growth, contributing an 8.5% increase, surpassing initial forecasts. Commenting on the growth reading, president Putin called on the government to ensure balanced growth next year and to bring down inflation rates.
The main driver for the GDP growth remains the surge in military spending, supported by the improved consumer demand amid greater outlays on social support, higher wages and strong fiscal stimulus despite monetary tightening, sanctions, and higher price pressures remain restrictive. We feel there is an increased public spending in war-related industries and construction and public spending remains at unprecedented levels.
Despite the Central Bank of Russia (CBR) is forecasting 0.5%-1.5% GDP growth for 2025, and the government is expecting 2.0-2.5% growth, which is significantly less than 2024 figure, we envisage growth to hit 1.6% and 1.5% in 2025 and 2026, respectively, taking into account that we foresee a ceasefire will be likely declared in Ukraine in 2025 which will lower Russia’s military spending and fiscal stimulus.