Putin: Russia’s GDP grows 4.6% in H1, inflation not slowing down

Russian President Vladimir Putin announced during a meeting on economic affairs that the Russian economy’s growth rate is high this year, as GDP grew by 4.6% in the first half of the year.

Putin said: “The Russian economy, like last year, continues to grow at a good and high pace, and according to estimates, GDP in the first half of the year increased by 4.6%, and industrial output increased by 4.4%.”

He pointed out that the ceiling of manufacturing industries has increased, as growth in this sector reached 8% over 6 months, according to TASS.

On the other hand, Russian President Vladimir Putin urged his government and the Central Bank to take coordinated measures to curb inflation.

Putin said in a government meeting broadcast on state television that inflation shows no signs of slowing down despite the Central Bank raising interest rates.

In July, the Central Bank raised interest rates by 2% to 18%, to curb inflation, which is currently around 9%.

The Russian central bank said in previous statements that analysts’ expectations for the average key interest rate for 2024 had risen to 16.8% from 15.9%, and for 2025 to 15% from 12.4%. But it indicated that estimates for the neutral key interest rate were unchanged at 7.5%.

A Reuters poll on Aug. 1 showed that the Russian central bank has no room to cut interest rates from 18% this year, as analysts expect inflation to exceed the bank’s target of 4% in a feverish economy driven by military production and consumer spending.

Russia’s economic growth relies heavily on large-scale state spending, but the government is currently focused on arms production to finance the war with Ukraine, helping to boost real wages in a tight labor market.

The Russian economy grew by 5.4% in the first quarter of 2024, according to official figures published on Friday, while Russian President Vladimir Putin denied that military spending on his offensive in Ukraine had reached unsustainable levels. The Kremlin has dramatically militarized the Russian economy since sending troops into Ukraine in February, where massive spending has helped boost growth and ease the pain of Western sanctions. Growth in the first quarter of the year rose to 5.4% in the first quarter of 2024 from 4.9% in the fourth quarter of last year, the national statistics agency Rosstat said.