Recently, Russian Prime Minister Mikhail Mishustin provided a positive outlook on the country’s economic prospects for 2024, forecasting a GDP growth rate of 4.1%, which exceeds earlier predictions. This optimistic projection stands in stark contrast to the sluggish recovery observed in the global economy and the ongoing geopolitical tensions that shadow many nations. The anticipated growth not only surpasses the Russian government’s previously defined target but is also notably higher than the global average and is set to outperform many developed economies.
Mishustin cited the Russian Federal State Statistics Service's most recent statistics, which indicated that last year, the GDP had already grown by 4.1% compared to the previous year, outpacing the official estimate of 3.9% by 0.2 percentage points. Despite some slowdowns in the latter half of the year, which posed substantial risks for GDP stagnation, the economy managed to achieve significant growth by year’s end. For instance, data from December 2024 revealed a sharp 4.5% year-on-year increase, indicating that the economy had maintained a healthy trajectory. Furthermore, the statistics agency has adjusted historical data for the past three years, revising the 2023 GDP growth rate upwards from 3.6% to 4.1%. This indicates a consistent upward trend in economic performance, much to the satisfaction of the president, who noted that 2024's growth would not just exceed Russian expectations but also outpace global standards, particularly among developed economies.
In nominal terms, Russia's GDP for 2024 is set to reach an unprecedented 200 trillion rubles, a milestone attributed primarily to the robust growth in the manufacturing sector. Last year, industrial output increased by 4.6%, surpassing expectations and serving as a key driver for the economy. Mishustin emphasized that the resilience of the Russian economy in facing unprecedented sanctions pressures has enabled it to display stable and vigorous growth for two consecutive years, crediting this achievement to a series of government policies and the collaborative efforts of academia and the workforce.
The performance of the Russian economy in 2024 has certainly exceeded earlier expectations across multiple sectors and has shown three distinctive characteristics. Firstly, the manufacturing sector has demonstrated remarkable success. Certain industries in Russia continue to thrive, particularly the manufacturing sector, bolstered by high levels of investment and consumer activities. Mishustin highlighted that the main drivers of growth in 2024 stemmed from 'increased investment, consumer vitality, and the strong performance of manufacturing.' Specifically, the mechanical engineering sector has emerged as a significant contributor, with manufacturing experiencing an impressive growth rate of 8.1% in the first eight months of 2024, including an almost 20% increase in machinery manufacturing. Other sectors, such as transportation engineering, automotive production, computing and electronic device manufacturing, and pharmaceuticals, have also recorded double-digit growth.
On the other hand, traditional sectors such as energy are grappling with the impact of sanctions, making it necessary for them to undergo adjustments and transformations. Mishustin pointed out that the fuel and energy complex continues to be in an adaptation phase, actively seeking new partnerships and exploring promising markets. Although tightening sanctions have adversely affected energy exports, he reassured that the decline in this sector has been kept at a minimal level, with reductions in mining activities remaining below 1 percentage point.
Amid these developments, the Russian economy faces a blend of opportunities and challenges as it embarks on the year 2024. Notably, inflation presents one of the principal challenges, soaring to 9.52%, significantly above the target level of 4%. Mishustin stressed that a key objective for the federal government moving forward is to implement responsible macroeconomic policies together with the Central Bank of Russia to mitigate inflation effectively. Additionally, the labor market poses another challenge, as unemployment in 2024 is at a historic low of just 2.3%. This low unemployment rate signifies a short-term labor shortage challenge, prompting the government to devise strategies aimed at attracting talent to essential sectors.
Given this context, President Putin has outlined the fundamental goals for the Russian economy in 2024, emphasizing the imperative to reduce inflation while achieving balanced growth. To fulfill these objectives, advancing supply-side reforms will be crucial. By 2025, the macroeconomic policies are expected to focus on optimizing economic growth structures, including establishing new enterprises based on modern management principles and leveraging new technologies such as robotics and artificial intelligence to enhance labor productivity, all geared towards ensuring balanced and high-quality growth as swiftly as possible.
However, it is essential to acknowledge the persistent pressures of high inflation, geopolitical uncertainties, and the long-term implications of the global energy transition, all of which will continually test the resilience of Russia’s economic growth. Therefore, the commitment to achieving a new equilibrium in growth holds tangible significance. Ilya Grashenkov, the director of the Regional Policy Development Center in Russia, remarked that profound changes are occurring in the economy, where in recent years, raw material exports are no longer the main driving force for growth; instead, the focus has shifted toward technological innovation and productivity gains. Experts assert that under the leadership of the government, Russia has established a solid economic foundation, dedicated to concentrating resources on reaching national development objectives, a necessary endeavor for fostering comprehensive economic sovereignty.