By Anders Åslund — U.S. economist, senior fellow at the Atlantic Council
From: New Voice of Ukraine 🇺🇦
Russia’s official growth rates have been confusing since it started the full-scale war on February 24, 2022. In 2022, Russia’s GDP fell by only 1.2%, and in 2023 it grew by 3.6% and the official growth is likely to be similar in 2024.
Yet, everything suggests that Russia is in a tight economic situation, which is likely to lead to minimal growth in 2025.
In their classical article in Novy Mir in 1987, the two Soviet economists Vasily Selyunin and Grigory Khanin showed that the Soviet Union exaggerated its economic growth by about 3 percentage points each year by doctoring the statistics. The main trick was that the Soviet authorities claimed that the quality improved when they altered a product, though in reality the quality often deteriorated. Selyunin and Khanin showed that most of the official growth was actually hidden inflation.
The same thing appears to be happening now. All the economic “growth” occurs in the military and related sectors, being produced by primarily state-owned companies and delivered to the state. The civilian sector is flat. But we know that the Russian state sector is massively corrupt, as the Anti-Corruption Foundation has shown. Embezzlement of state funds must not be accepted as value added. Independent Russian economists, notably ROMIR and Defense Minister Andrei Belousov’s old macroeconomic center claim that the hidden inflation is substantial – up to 5%.
Voice of Ukraine 