Russia’s economy continues to put in robust growth. Industrial production and GDP figures are surpassing analysts' expectations, according to recent reports and statements from government officials and international organisations.

Russia’s industrial production growth accelerated in May to 5.3% y/y (y/y), with a cumulative increase of 5.2% in the first five months of 2024, significantly exceeding analysts' projections.

The Economic Development Ministry reported that Russia's GDP grew by 4.4% y/y in April, following a 4.2% increase in March. This steady growth trajectory has led the World Bank to revise its forecasts for Russia's GDP growth in 2024-2025. The June World Bank report on the global economy predicts Russia’s economic growth to reach 2.9% in 2024, 1.4% in 2025, and 1.1% in 2026. This marks an improvement from its April forecast, which projected 2.2% growth for 2024 and 1.1% for 2025.

“While strong growth in late 2023 and early 2024 is expected to support activity through 2024, expected tightening of macroprudential measures and a reduction in the availability of preferential mortgages will curb private sector demand,” the World Bank report noted.

Despite these positive developments, stubbornly high inflation remains the main headache. Russian Finance Minister Anton Siluanov, speaking at the St. Petersburg International Economic Forum (SPIEF), expressed optimism that inflation would slow down in the second half of 2024, but it seems more likely that inflation will end the year closer to 8% than the CBR forecast of 5.4%.

What is holding the Russian war effort up is the continued strong oil and gas revenues which are projected to increase by more than 50% y/y to $9.4bn in June. Despite numerous sanctions targeting oil and gas revenues, Russia has successfully redirected its oil exports from Europe to India and China, ensuring critical financial inflows for its budget.

That income coupled with the heavy state spending on the military industrial complex are trickling down to fuel consumption. Consumer spending in Russia saw substantial growth in 2023 and 2024, rising by more than 6% and 5%, respectively.

Al this is creating a benign pollical environment for Putin. Public sentiment remains strong in favour of the government, with a Levada Center poll released on May 30 showing that 71% of Russians believe the country is "going in the right direction," and 87% expressing support for President Vladimir Putin.

In contrast, a recent survey by Ukraine’s Razumkov Center, published on June 26, indicates that only 33% of Ukrainians believe their country is moving "in the right direction," while 47% feel it is heading "in the wrong direction."

The ongoing conflict between Russia and Ukraine continues to impact the region. According to the June 11, 2024, issue of the Russia-Ukraine War Report Card, Russian forces have gained 167 square miles of Ukrainian territory in the past month, whereas Ukrainian forces have regained only one square mile. Despite these gains, former chairman of the Joint Chiefs of Staff Gen. Mark Milley stated that Russian forces "don't have the military capability to overrun Ukraine," maintaining that the war remains a stalemate.