Last year, the Russian economy benefited from an arms boom. Getty Images / SERGEI GUNEYEV, JacobH ; Collage: Dominik Schmitt
As the Vienna Institute for International Economic Studies (WIIW) announced on Tuesday, the Russian economy is now operating at its “capacity limit”.
After growth of 3.5 percent last year, the institute only expects Putin’s economy to grow by 1.5 percent in 2024. In addition to inflation, the reasons for this are the key interest rate, which has been raised to 16 percent.
The WIIW has also adjusted its growth forecast for Ukraine. Instead of 3 percent, the think tank is now assuming 1.2 percentage points.
Russia’s rapidly growing economic growth, driven by the arms boom caused by Putin’s war in Ukraine, may soon reach its limits. The Vienna Institute for International Economic Studies (WIIW) said on Tuesday that Russia’s economy was now operating at its “capacity limit” and was showing “increasing signs of overheating.” The Russian economy recorded growth of 3.5 percent last year, according to the think tank specializing in Eastern Europe.
Due to the high inflation rate and the increase in the key interest rate to 16 percent, the WIIW only expects growth of 1.5 percent this year.
“Russia is increasingly dependent on the war continuing. The enormous expenditure on this acts like a drug on the economy,” said Vasily Astrov. He is an expert on Russia at WIIW. Around 29 percent of the federal budget is expected to flow into the military budget this year.
The WIIW has cut its growth forecast for Ukraine, which is suffering from Russia’s war of aggression, by 1.2 percentage points to 3 percent this year. A possible election victory for Donald Trump would make the future of Western financial aid for Ukraine more uncertain, the institute argued.
With material from dpa