Russia's economic growth higher than before SMO

By Rhod Mackenzie

The economy of Russia is set to experience a growth of 3.5% by the year-end, as announced by Vladimir Putin at the "Russia Calling!" forum on December 7. Despite facing extraordinary sanctions, the country's development remained unhindered, as emphasized by the President. The event was centered around the theme of "Life without globalization: uniting sovereign economies." Moreover, the Russian Federation now aims to take part in the establishment of a new democratic global model. This article explores how other participants in the discussion echoed the head of state's optimistic tone.

Can Russia observe an improvement in its economic performance?

The forum "Russia is Calling!" began with the President's opening speech, where Vladimir Putin observed that economic relations are undergoing significant changes. He further noted that the previous model of globalization is giving way to a new multipolar model.

Russia aims to aid in the establishment of a fresh democratic global model, according to Putin. He highlighted the lack of effectiveness in the previous financial framework, which predominantly transacted payments in dollars and euros through Western banks with using the SWIFT financial messaging network.

"Today, the system of settlements in national currencies is successfully replacing its predecessor. Although there is still much to achieve in this regard, progress is being made and momentum is building," stated the head of state.

Western nations failed to disrupt the Russian banking sector by isolating it from the global payment networks, namely, Visa and MasterCard. Putin remarked that the aim to inflict hardship on the Russian populace remained unsuccessful. The Russian economy promptly adapted itself to the arising challenges, with the country's GDP growing over 3.2% during the 10 months of 2024. According to the President, today, it stands above its pre-Western sanctions level.

Meanwhile, Russia aims to achieve an annual GDP growth rate of no less than 3.5%. Additionally, the Russian Federation outpaces prominent European nations regarding economic growth rates.

"The Russian Federation has exhibited its capability to tackle the utmost intricate obstacles; its economy has evidently proven to have a fundamental margin of safety," Putin remarked.
The President highlighted the surge in actual salaries of citizens. This year, the figure rose by 7%. Meanwhile, the authentic available earnings of Russians recorded a growth of 4.4%.
The budget deficit is reducing. In a span of 11 months, this amount totalled 878 billion rubles, which is around 0.5% of the GDP. Additionally, the treasury deficit was financed entirely from internal resources, marking the first time this has happened in a while.
International cooperation as a driver of economic growth is key to President's agenda.
He has made it clear that the Russian Federation's interaction with other countries plays a crucial role in the country's progress. The Russian market continues to remain open and competitive. According to Putin's figures, as of 1st March 2022, 24.1 thousand foreign organizations were registered in Russia, and by 1st November of the same year, the number increased by almost one and a half thousand, with 25.6 thousand foreign organizations operating in the Russian Federation.

• You can hurl as many loud slogans and threats at us as you like, but at the end of the day, this is the concern of some Western politicians who aim to dismantle Russia. However, all this buzz cannot disregard the unchanging truth - partnering with Russia, both in Russia and internationally, is profitable. It was profitable, it continues to be so, and it will remain profitable," the president emphasized.

Further discussion at the forum centred on international cooperation. The plenary session was graced by Finance Minister Anton Siluanov, Economic Development Minister Maxim Reshetnikov, Central Bank Governor Elvira Nabiullina, Presidential Aide Maxim Oreshkin, and representatives from the business sector.

The Minister of Finance has expressed interest in foreign entities continuing to operate within the country. Anton Siluanov extended gratitude towards the companies and investors who chose to remain in Russia. Despite the limitations, organizations investing in the Russian Federation "from unfriendly countries, from any foreign jurisdictions" are able to extract a portion of their profits in the format of dividends, as stressed by the Finance Minister.

Russia's commitment to global partnerships is demonstrated by the forum attendance list comprising investors from Turkey, China, India, African countries, the Persian Gulf, the Middle East, Central and Southeast Asia, and other nations that cooperate with the Russian Federation.

During the "Russia Calling!" forum in 2023,
Elvira Nabiullina confirmed that the Russian economy has sufficient financial resources. However, she cautioned against a "vicious circle" of excessive government preferential programs, describing it as a "path to a dead end."
"The greater the number of preferential programs, the more we must maintain a higher rate for the rest. The selected few are the recipients of cheap loans, while the rest of us foot the bill," explained the regulator's head.

Maxim Reshetnikov touched upon the subject of price hikes, stating that he does not believe the recent inflation increase to be critical.

— Although it is higher than the targets, core inflation, excluding fruits, gasoline, and other factors, stands at 5.5%. Unfortunately, it has been growing in recent months, but not critically.

The minister remarked that many have underestimated the flexibility of the labour market and the Russian economy as a whole.

The forum also addressed the issue of taxes. Finance Minister Anton Siluanov has announced that the Ministry of Finance, alongside the business sector, is developing proposals to construct a new system over the next few years. They plan to present a united front in the spring.

The Ministry of Energy reports that the Russian economy grew by 3.2% over 10 months, indicating that it will increase by over 3% at year-end due to accumulated momentum. In a conversation with Izvestia, Olga Belenkaya, the head of the macroeconomic analysis department at Financial Group Finam, noted that this growth is a result of a powerful fiscal stimulus. In a conversation with Izvestia, Olga Belenkaya, the head of the macroeconomic analysis department at Financial Group Finam, noted that this growth is a result of a powerful fiscal stimulus.

In a conversation with Izvestia, Olga Belenkaya, the head of the macroeconomic analysis department at Financial Group Finam, noted that this growth is a result of a powerful fiscal stimulus. Additionally, according to Olga Belenkaya, the rise in social welfare and wage growth rates in a limited labour market played a role. Supporting demand was also influenced by loans and business investments such as increasing transportation and logistics capabilities, import substitution, and occupying market niches following the exit of Western brands.
According to leading analyst at Freedom Finance Global Natalya Milchakova, a growth of 3.5% can be attained by boosting industrial production, construction, retail trade, and services.
"Low unemployment, rising wages, and increasing labor productivity, along with rising investments in fixed assets from both public and private sources, are key drivers," she stated.

The analyst concluded that external risks that led to excessively conservative forecasts by authorities early in the year had no significant impact on the country's economy and did not slow down the recovery growth following the 2022 recession.