The Kremlin has initiated an information operation aimed at creating a false impression that the Russian economy is performing well, despite numerous indicators pointing to macroeconomic issues, writes the analytical center "Institute for the Study of War" (ISW) in its report dated January 22.
"ISW continues to monitor macroeconomic data that directly contradict the Kremlin's claims that the Russian economy is thriving. Recently, the Kremlin adopted a policy focused on increasing defense spending while Russian society faces a labor shortage, broader demographic challenges, declining savings, and growing dependence on aid, as the Russian economy encounters rising interest rates, inflated salaries, and deteriorating production capacities," the ISW analysts note in the report.
During an economic meeting on January 22, Putin stated that 2024 would be a "strong year" for the Russian economy, claiming that Russia has a managed budget deficit of 1.7 percent and has achieved a 26 percent increase in non-oil and gas revenues, reaching 25.6 trillion rubles (approximately $257.9 billion) in 2024. He also announced a retroactive 9.5 percent increase in insurance and military pensions to combat rising Russian inflation.
On January 21, Bloomberg reported that the Russian Ministry of Finance released a report forecasting economic growth and suggesting that Russian budget revenues in December 2024 will hit a record level of over 4 trillion rubles (around $40 billion) - 28 percent more than in December 2023, marking the highest level recorded since 2011.
However, this data does not account for the unacceptable level of Russian defense spending, rampant inflation, increasing deficits, and the erosion of the Russian sovereign wealth fund.
"The Kremlin's efforts to showcase economic strength are largely an information operation designed to reassure the domestic audience and demonstrate Russian power abroad while simultaneously masking the real challenges facing the Russian economy, which are exacerbated by Russia's war against Ukraine," the ISW report concludes.