Russian Economic Growth Surpasses Expectations, But Challenges Loom
Russian President Vladimir Putin recently highlighted the country’s economic growth, which outpaced that of the United States and other developed economies. In the US, the growth rate was 2.8%, while in the Eurozone, it was much lower, with France at 1.1% and Germany at -0.2%. Russia’s GDP growth, on the other hand, reached 3.9-4% at the end of last year.
However, experts warn that this growth is not sustainable in the long run. “The current growth is based on a large number of factors, including government spending, resource reallocation and high commodity prices” said Michail Kossow, a lecturer at the Russian Plechanov University. “These growth sources are not long-term sustainable.”
The Russian economy is facing a range of challenges, including a shortage of skilled labor, a lack of investment in technology and a dependence on oil and gas exports. The country’s economic growth is also being driven by a surge in domestic demand, which is leading to a shortage of goods and services.
Experts predict a slowdown in Russia’s economic growth in the coming years, with a forecast of 1-1.5% growth in 2025, down from 3.9-4% in 2024. The country’s inflation rate is also expected to rise, driven by a mismatch between supply and demand.
To overcome these challenges, Russia needs to transition to a more qualitative and sustainable growth model, one that is based on the development of new industries, such as IT, biotechnology and machine building, as well as the production of complex goods and the export of non-resource goods.
Investments in education and training are also crucial, as the country’s workforce needs to be equipped with the skills required for a modern economy. “The acute shortage of skilled labor in Russia is being solved through a migration policy, with large companies hiring hundreds of migrants, while the quotas for foreign students receiving free higher education in Russia are being increased” said Wladimir Tschernow, an analyst at Freedom Finance Global.
In the next decade, experts predict a high demand for certain professions, including constructors, equipment technicians, electricians and industrial programmers.