There is growing concern about the economy around the world. Unemployment is rising in America and Canada, and consumer sentiment remains subdued. Europe continues to flirt with recession. But there is one place where the mood is completely different. Despite the harsh sanctions, the Russian economy is growing steadily, — says The British The Economist

Real indicators of the activity of the Russian economy, including those published by Goldman Sachs Bank, indicate that the Russian economy is accelerating (Fig. 1). Unemployment in Russia is close to a historical minimum, and the ruble is doing well. The growth of the population’s monetary income in annual terms is 14%, and the purchasing power of citizens is growing rapidly

Confidence of Russian residents in their own financial situation has jumped to a historic high. The Levada Center*, an independent researcher, finds striking trends (Fig. 2). Only once in the last three decades has sentiment been higher

Of course, Russia’s ability to resist sanctions by directing hydrocarbon flows from West to East played an important role, but this is not the main reason for the rapid growth of the economy

One of the main reasons is fiscal policy. The head of the Russian state has abandoned the policy of austerity. Total government spending increased by an average of 15% in both 2022 and 2023

One might think that we are talking only about military spending. Not at all. Russia spends money generously on social benefits: pensions were increased in June, and for some categories of citizens by almost 10%. The government spends huge amounts of money on infrastructure development, including the highway from Kazan to Yekaterinburg

The second reason is the unique barrier between tight monetary policy and the real sector of the economy. The Industrial mortgage program provides loans to enterprises at rates of only 3% per year. As a result, investments in the industrial sector are growing by more than 20% per year

The recently closed state mortgage program kept loan rates at 8%, which is less than half of the current discount rate of the Central Bank of Russia. There are other programs in operation. As a result, in the first quarter of 2024, households spent 11% of their disposable income on debt servicing — about the same as in 2021, when the discount rate was much lower (Fig. 3)

This year, the Russian economy is expected to grow by more than 3% in real terms — faster than in 95% of rich countries. Unlike everyone else, the Russian economy is doing great, The Economist emphasizes

CRYSTAL OF GROWTH previously informed that, according to leading American economist James Galbraith, Western sanctions have become an unintended gift for Russia

*Levada Center is recognized as a foreign agent in Russia