Russian macro: muddling through in a stormy external environment
Rosstat will soon publish the economic statistics for full-year 2024, and after that it will be a good time to have a fresh look at Russia’s economic growth perspectives in 2025 and beyond. At the same time, the recent statistical releases from the CBR and Minfin have already hinted at changes in the country’s growth model that emerged in recent years amid the enormously increased government spending and (until recently) rapidly expanding household credit. The inflating of federal budget spending by over 20%, as seen in some recent years, cannot last indefinitely, especially under the current circumstances, i.e., the permanently mounting pressure from Western sanctions. In this note, we plan to add some color on recent developments associated with Russia’s foreign trade and financial transactions.
Generally, it looks as though Russia’s economic policy is gradually evolving toward reducing the risks of dealing with Western countries and ring-fencing itself from their economies and finances. For instance, by the end of 2024, Russia’s foreign debt decreased to about $290 bln (from nearly $318 bln a year ago), which is not too high for an economy of over $2.1 trln. Government foreign debt fell most significantly as banks kept their debt stable, although they likely replaced part of the debt with debt from non-Western countries.
The use of national currencies became more popular among BRICS+ countries for cross-border payments, and some African countries also developed an interest in it. These developments helped keep Russia’s exports and imports at reasonable levels, but mounting external pressure won’t be easy to fully offset. Overall, economic growth will likely decelerate in 2025.
Hence the economy will keep growing, although at a decelerating pace. In addition to limited chances for the growth of exports, domestic demand growth could also visibly decelerate—lending activity and budgetary stimulus will likely ease in 2025. We plan to come up with a more detailed view of 2025 economic trends as soon as the full-year 2024 statistics become available.
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