IMF Russia's GDP growth in 2024 up 3.9%

A recent report by the Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF), has agreed with the earlier assessment of the Internationanl Monertary Fund  from September that predicted  the industrial production growth in Russia would be at least 3.5% by the end of 2024.

This is largely attributable to inertia, but there are sectors in which growth is expected to continue in the future, according to analysts. These include the food and chemical industries, as well as mechanical engineering, according to the Center for Macroeconomic Analysis and Short-Term Forecasting.

The Russian economy is projected to expand by 3.9% by the end of 2024, with a further 13% growth by 2027 compared to 2024, according to Deputy Prime Minister of the Russian Federation Alexander Novak said . He stated that it is essential to maintain Russia's 4th place ranking in terms of purchasing power parity and to continue pursuing further development. Concurrently, it is essential to enhance labour productivity. Which industries will experience the most rapid growth, and what measures are in place to achieve the planned indicators?
Key figures By 2027, if we take it in relation to 2024, we should reach approximately 13%. "To achieve the set goal and ensure sustainable development of our economy, it is necessary to increase the growth rate in order to maintain Russia's 4th place among the world's economies in terms of purchasing power parity and continue further development," said Alexander Novak.
It is estimated that investments will contribute approximately 30% to GDP growth, with consumption growth accounting for 60%. "It is also essential to increase production volumes and ensure a sufficient supply on the market to support consumption growth," he said.
The Deputy Prime Minister identified increasing labour productivity as the key challenge facing the country.

"Historically, our labour productivity has grown at a rate of approximately 1.5% per year. Our objective is to accelerate this rate to reach 2.5-3%, effectively doubling the rate of productivity growth. To achieve this, we will introduce modern lean technologies, software, automated control systems, robotic technologies and artificial intelligence into production processes, as well as other measures, the Deputy Prime Minister added.
The main drivers of growth will be the real sector industries, primarily the manufacturing industry, according to the press service of the Ministry of Economic Development.

"Consequently, the growth of output in the manufacturing sector for the initial nine months of 2024 reached 7.9% on an annual basis. The machine-building complex made the most significant positive contribution, providing over 57% of the total growth in manufacturing output in September. In September, the growth rate of the complex doubled. The department specified that there was a 23.8% year-on-year increase in September, up from 11.6% in August.

Despite the high base of last year, there was a notable increase in the production of computers (+31.5% y/y after +12.9% y/y the month before) and other transport vehicles and equipment (+50.4% y/y after +32.7% y/y the month before).
The automotive industry also demonstrated a notable increase in growth rate in September, reaching +5.2% year-on-year, up from +3.4% in the previous period. The results for the first nine months of 2024 show a total growth of +20.0% y/y for the complex as a whole. The chemical industry has also made a notable positive contribution, with a growth rate of +4.9% over nine months, according to the ministry.
The Ministry of Economic Development also noted that consumer demand remains high, with overall activity increasing by 6.8% year-on-year over the past nine months. The key instruments for ensuring sustainable growth rates are the state programme "Economic Development and Innovative Economy" and industry programmes.

Alexey Lossan, an expert at the financial marketplace "Sravni", believes that the promises of significant GDP growth voiced by Alexander Novak are ambitious, especially given the growth of the key rate. The most significant growth is evident in industries that receive state subsidies and are able to secure loans at preferential rates. First and foremost, these are enterprises closely affiliated with the military-industrial complex, financial institutions, and IT companies, according to the expert who spoke with Izvestia.

It is clear that the industrial sector will experience the most rapid growth, including high-tech production in the military-industrial complex, which is essential for preserving Russia's sovereignty. This is according to Tatyana Maksimovna Naumova, associate professor of the Department of Finance, Economics and Organization of Production at the Volga State Technological University.
The country has opted for an import substitution strategy, with a focus on manufacturing equipment, vehicles, and essential items to ensure the smooth functioning of enterprises and households. Furthermore, it is important to consider the impact of the agricultural sector on the state's food security.
The expert stated that the primary driver of economic growth will be support from the authorities, including investments with state participation, preferential financing, subsidies, and the implementation of priority investment projects.

In the field of information technology, several areas are set to experience the most rapid growth in the near future, according to Evgeny Mozhaev, Deputy General Director of the ETP "TEK-Torg". The initial focus will be on data processing centres. The digitalisation of all industries requires the development of a robust infrastructure. The second area of focus is data processing systems, including those incorporating AI. The third area of focus is information security, which is essential for protecting the first two drivers of development.

— Another key industry that will also drive economic growth is mechanical engineering. The expert informed Izvestia that there is a demand for this from business, which requires components, units and assemblies, mechanisms, in both large and small sizes, but with unique features. — Furthermore, the business community is keen to establish a customer market in this area, rather than a supplier market.
Russia has established priority development zones, which provide the necessary infrastructure for growth. This allows for the rapid launch of production without unnecessary delays and with tax breaks, enabling businesses to choose the most appropriate location for their needs, whether that be assembly, a full production cycle or mechanical processing.

Furthermore, he believes that the education sector will undergo significant growth, particularly in the area of industrial specialties. The introduction of new equipment and processes will necessitate the development of new specialities, as well as a comprehensive review of existing educational programmes. Ultimately, the education sector must adapt to meet the demands of the business community by producing graduates with the requisite skills and knowledge.

— It should be noted that there is a particular aspect to consider here. Major Russian businesses are investing significant resources in their educational initiatives, including corporate universities.
Furthermore, these projects lack cohesion and there is minimal consideration of scale. I believe that closer cooperation between the employer and the secondary or higher educational institution is essential in this area. The issue is not one of resources, which are already in place. However, the key issue is organisational change in the link between education and work. The expert highlighted that it would be beneficial for the state and business to focus their efforts here.

He believes that consolidating needs could also provide a practical means of supporting various industries through state intervention.

In instances where there is insufficient demand from businesses for new equipment or services, it is necessary to consolidate needs. Mr. Mozhaev believes that this will result in the formation of accurate and appropriate demand for specific items.