The rebound of the Russian economy is occurring in tandem with a massive increase in public spending, particularly military spending. The Russian government plans to spend $119 billion on defence in 2024, a rise of nearly 90 percent from 2021.
In addition to increasing arms production, the war in Ukraine has helped lift other industrial sectors. Examples include construction – with the building of extensive defensive fortifications in eastern Ukraine and southwestern Russia – and manufacturing.
"The military-industrial complex has been operating at full capacity since February 2022,” says Julien Vercueil, an economist specialising in Russia at the Paris-based University of Languages and Civilizations (
Institut national des langues et civilisations orientales or Inalco).
“To facilitate recruitment, workers have been exempted from conscription. Wages in the sector have also risen, boosting household consumption, which has been one of the driving forces behind Russian growth."
Russia also continues to benefit from revenue generated by oil and gas.
"Although down from their peaks of 2022, world hydrocarbon prices have remained high, enabling Russia, despite the sanctions, to earn strong export revenues," says Vercueil.
Despite being the world’s third-largest oil producer – after the United States and Saudi Arabia – and the second-largest natural gas producer, Russia experienced a 24 percent decrease in hydrocarbon revenues in 2023 compared with the previous year, the result of Western sanctions and reduced exports to Europe. The country hopes to see a recovery in 2024 by boosting its exports to China and India.
Russia continues to
export to the European Union and even the United States through a loophole in sanctions,
according to a November report by the Global Witness watchdog group.
