World Bank. Why Russia Remains 4th in GDP PPP!

By Rhod Mackenzie

Well despite the best efforts of the US,EU NATO and the other useless wankers with their imposition of shock and awe sanctions and their attempts to destroy the Russia ecomomy according to the latest report the World Bank has confirmed that Russia continues to rank fourth in the global Gross Domestic Product by Purchasing Power Parity rankings.
However, analyststs are monitoring the situation closely and have warned that they think things could potentially change for the worse this year.So what is going on the Russian economy, what are its prospects and what are the potential risks.

The data in the World Bank report aligns with the IMF's earlier assessment, indicating that Russia maintains its position as the fourth-largest economy in the world in terms of purchasing power parity. Maintaining this position, especially in the context of unprecedented sanctions pressure, demonstrates the Russian economy's resilience and its capacity to adapt to external shocks.
However, it is important to understand the drivers and context of this result, says Deputy Head of the Committee for International Cooperation and Export of Opora Rossii Namer Radi.
There were three aspects that proved to be of the utmost importance. The strategic realignment of trade flows to Asia, albeit at a reduced rate compared to Europe, resulted in a significant influx of currency. The military-industrial complex (MIC) has been a significant driver of economic growth, particularly in the manufacturing, metallurgy, chemistry, construction and related sectors.
State support stimulated domestic demand, which, in turn, thanks to infrastructure projects and preferential mortgages, also spurred construction sector.
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Olga Belenkaya, head of the macroeconomic analysis department at FG Finam, attributes the positive GDP dynamics to a significant expansion of household consumption and investment activity. This was facilitated by a budgetary impulse, characterised by an increase in military spending and the govt financing of import substitution. The lending sector also contributed to this growth, as did the highest growth in wages for 16 years in a deficit labour market.
"If we consider the types of economic activity, according to our estimates based on Rosstat data, the main positive contribution to the GDP dynamics last year was made by the manufacturing industry, wholesale and retail trade, financial and insurance activities, public administration and military security, social security, information and communications.
With the exception of agriculture, mining, and real estate transactions," the analyst lists.
Consequently, in 2024, GDP by PPP increased from 6.45 to 6.92 trillion dollars, and the gap with Japan doubled to $514 billion. India is in third position with 16.2 trillion, the USA in second with 29.2 trillion, and China in first place by a significant margin with 38.2 trillion. Germany is also in the top ten, with a figure of six trillion.
Brazil and Indonesia are in joint ninth place, with a figure of 4.7 trillion, while France and Great Britain are in joint eighth place, with a figure of 4.2 trillion.
Now the forecasts for this year differ. Vasily Girya, CEO of GIS Mining, is of the opinion that Russia will maintain its position as the fourth largest economy in the world in terms of PPP, despite the anticipated slowdown in growth rates from 4.3% to 1.5-3% in the baseline scenario.
Government investments and orders, substantial federal projects in the fields of construction, transport, extraction and processing of raw materials will contribute to this position. "In addition, industries with high added value are experiencing active development, including the services and consulting sector, IT, software and information security, industrial mining and digital finance," he points out. Furthermore, the analyst emphasises the significance of the agro-industrial sector and domestic tourism.
Radi has stated that the current growth model has limited potential and creates risks. These include military spending leading to overheating, a shortage of personnel in civilian sectors, fueling inflationary pressure, and increasing distortions in the economy.
"The shortage of qualified specialists and technological lag in civilian industries are slowing down further development, and limited access to technologies, markets and investments are increasing local costs.
However, investment growth is being hindered by inflation and high borrowing  costs, plus to an extent the reliance on oil and gas prices persists.
Consequently, the growth rate this year is expected to decelerate to 1.5-2.5%," he explains. The economy will continue to rely on the military-industrial complex, but its capacity as the primary driver is being repelaced.
Another cause for concern is the deterioration of the trade balance: according to the Federal Customs Service (FCS), the surplus in January-June decreased by 18.4% year-on-year, to $63.9 billion.
Foreign trade turnover for the first half of the year decreased by 3.6% compared to the same period in 2024, reaching $327.1 billion. Due to the decrease in energy prices, there was a 6.3% decrease in exports, which reached $195.5 billion, while imports increased by 0.8% — reaching $131.6 billion.
This was largely facilitated by the strict monetary policy, which limited demand for imports and increased the attractiveness of ruble interest-bearing assets relative to foreign currency assets, as Belenkaya notes.
"The ruble is facing increased pressure, leading to inflation risks and a rise in import prices. This is resulting in fewer opportunities to purchase essential goods and technologies. The risk of a budget deficit is also increasing," Radi points out.
The analyst is confident that the high position in the rating is a result of the economy's adaptive capacity and the economic situation, particularly the high prices for raw materials in the past and military spending.
However, they do not consider it to be a fundamental strengthening of the economy. In the absence of structural reforms, including the identification of alternative raw materials, investment in human capital and civilian technologies, and diversification, it is challenging to ensure sustained positive growth.
The Ministry of Economic Development has expressed similar concerns. In particular, the head of the ministry, Maxim Reshetnikov, stated in June that the Russian economy was on the brink of recession, but this could be avoided if the authorities did not make mistakes, including in monetary policy.
As is known, the Bank of Russia has so far taken a course towards easing. In June, for the first time in almost three years, the key rate was lowered to 20% per annum from a record 21, and in July it was further lowered to 18.
The Central Bank anticipates a one to two percent rise in GDP this year. The regulator has clarified that a slowdown is inevitable after the rapid growth of previous years.
Given the $500 billion  gap with Japan and the  potential for the yen exchange rate to adjust, Russia could  return to fifth place by the end of 2025 but that is unlikely despite Japan having an incomparably more developed and sustainable civilian technological base.
Maintaining its position in the current conditions would be more of a tactical success than evidence of strategic strengthening," Radi concludes.
Analysts have stated that the gap between the top three is so large that it is not realistic to expect them to be caught up with in the foreseeable future.
So despite 3 years of shock and awe plus all the economic headwinds Russia remains in reasonable shape compare with those who imposed sanctions on it.