In 2024, the Russian economy grew by 4.1% – this estimate from Rosstat estimate was reported to president Putin on Friday by Russian prime minister Mikhail Mishustin. At the same time, Rosstat once again revised its growth estimates for previous years, a practice that has become the norm in recent years. These revisions fluctuate within a range of 0.5% to even 0.9% of GDP.
In light of this, the analysis of the figure reported by Mishustin does not appear particularly meaningful. In the future, it may turn out that economic growth was closer to 3% or, conversely, to 5%. A downward revision would indicate that under the conditions of an abnormally high central bank refinancing rate, the economy was slowing down, while an upward revision would suggest it was accelerating. That said, assessing the true trend is a key issue for economic forecasting and policy adjustments.
Another factor distorting the picture is Mishustin’s claim that the economy is becoming more diversified and growing due to manufacturing and high-tech industries. In reality, growth is concentrated in industries tied to military needs, while the civilian and consumer sectors of manufacturing are either stagnant or showing weak growth. Moreover, the gap in growth rates between the two sectors did not narrow at the end of 2024 – a sign that would indicate normalisation and overcoming overheating – but instead widened due to aggressive government spending. This, in turn, will contribute to greater inflationary pressure in the coming year.
Expert calculations and business surveys indicate that, overall, industry has been stagnating since the summer. Extractive industries also made a negative contribution, showing slight negative growth by the end of the year. A more detailed sectoral analysis reveals that high interest rates have started to put pressure on production capacity in both the extractive and consumer sectors, while in the military-industrial complex, budgetary injections continue to fuel output. This allows Rosstat, the prime minister, and the president to pass off the military-industrial complex bubble as a sign of Russia’s economic resilience against sanctions.
According to Rosstat's initial estimate, the Russian economy grew by 4.1% in 2024. In nominal terms, GDP surpassed 200 trillion rubles, which Prime Minister Mikhail Mishustin proudly announced to Vladimir Putin on Friday, calling it a 'historic high.' However, both men knew perfectly well that this threshold was crossed not so much due to economic growth as due to rising prices. According to Rosstat’s preliminary assessment, the GDP deflator index (i.e., the price increase of goods and services produced by the economy) reached 8.9% last year – and possibly even higher in reality. This means that rising prices contributed twice as much to the reported GDP growth as the actual increase in production volumes. For example, if 100 cabinets are produced and sold at 1,800 rubles each, the total revenue would be 180,000 rubles. If production increases by 4% (to 104 cabinets), revenue rises to an unremarkable 187,200 rubles. However, if those 104 cabinets are sold at a 9% higher price (1,960 rubles each), total revenue jumps to a record 203,900 rubles.
That said, discussing Rosstat’s reported growth rates is of limited value under current conditions. Since 2017, when the agency was subordinated to the Ministry of Economic Development (which is responsible for economic growth while Rosstat evaluates it – meaning the evaluator reports to the entity it evaluates), retrospective data revisions have become the norm. Between 2018 and 2020, such revisions were typically limited to fractions of a percentage point. However, from 2022 to 2025, they have reached as much as 1% of GDP. For example, the 2021 growth rate was revised from 4.7% to 5.6%. Conversely, at the end of 2022, GDP was initially projected to shrink by 2.5% due to the first year of war and sanctions, but the final figure was reported as a 2.1% contraction. By 2024, that estimate was revised down further to 1.2%, before being adjusted back up to 1.4% this year. Rosstat also revised 2023 GDP growth from 3.6% to 4.1%. The Telegram channel MMI notes that these GDP revisions are accompanied by adjustments to the GDP deflator index, which tracks producer price growth.
As a result, the actual GDP growth for 2024 could ultimately be closer to either 3% or 5% – a difference of critical importance. If growth is at the lower end, it would indicate a slowdown due to the sharp increase in the central bank’s key interest rate. If at the higher end, it would suggest that economic growth accelerated despite tight monetary policy. In this context, Rosstat’s initial GDP estimate appears largely meaningless.
While presenting Rosstat’s data to Putin, the Prime Minister proudly announced that 'the economy is becoming more technologically advanced and diversified,' emphasising that manufacturing is the main driver of growth. Both men, however, were likely well aware of what was behind these numbers. The extractive sector has shown slightly negative growth for the second consecutive year (-1.8% last year and -0.9% this year), while military production has fueled rapid growth in the manufacturing sector, which expanded by 7.6%.
Analysts' calculations show that consumer-oriented manufacturing sectors exhibited weak growth or stagnation, whereas those linked to the defence industry surged. A study by the Higher School of Economics (HSE) and recalculations of Rosstat data by the Centre for Macroeconomic Analysis and Short-Term Forecasting (CMASF) in Graph 1 exclude military-industrial subsectors, whereas Rosstat’s baseline index includes them. Adjusted for military-related industries, the manufacturing sector shows signs of recovery from the 2022 downturn but has remained stagnant since early 2024. Graph 2, based on the central bank’s calculations, classifies military sector output as part of 'heavy' investment industries. According to the central bank’s 2023 estimates, the consumer industry index increased by 11.2 points from November 2022 to November 2023, but only by 4.6 points from November 2023 to November 2024 – meaning its growth rate has slowed by 2.5 times.
Both graphs illustrate that the gap between the two industrial groups – consumer-oriented and military – continued to widen significantly towards the end of 2024. This indicates that a substantial portion of the economy’s resources (both human and material) has been directed toward producing goods that are not consumed on the domestic market (→ Oleg Vyugin: The 2025 Crossroad), contributing to heightened inflationary pressure.
At a meeting with Putin, the Prime Minister also proudly mentioned an acceleration in economic growth at the end of 2024. According to Rosstat, seasonally adjusted growth in December compared to November was 2.3%, and 8.2% compared to December 2023. The most significant contributors were manufacturers of metal products, computers, electronic and optical devices, aircraft, and other transport equipment – sectors primarily linked to the defence industry. According to the Centre for Macroeconomic Analysis and Short-Term Forecasting (CMASF), defence-related industries grew by 19.4% in November, while all other industries grew by only 3.2%.Production of metal products increased by 15% in December (seasonally adjusted, compared to November). Transport equipment production rose by 15.5%, driven by growth in the aerospace sector (+21.5%) and other transport equipment not classified elsewhere (+14.2%) – both of which are linked to defence, as noted by CMASF experts. Excluding these military-driven industries, expert estimates suggest that overall industrial output grew by just 1.2% month-on-month and 1.3% year-on-year in December 2023. However, even this modest growth in civilian industries is unlikely to be sustained.For example, the increase in petroleum product output in December was seen as compensatory, attributed to the restoration of facilities after attacks by Ukrainian drones, according to CMASF. The 2.2% month-on-month growth in food production was largely due to seasonal factors.
The Central Bank’s Business Climate Indicator has been in negative territory since August, signaling stagnation (→ Re:Russia: Unequivocal Double-Digit Inflation). However, in January the Global Russia Manufacturing PMI, calculated by S&P Global based on purchasing managers’ surveys, rose from 50.8 in December to 53.1, possibly reflecting businesses' efforts to replenish inventories rather than genuine growth.
According to another recent CMASF report, industrial stagnation set in at the beginning of summer. They draw attention to the fact that since the beginning of the second quarter the growth of investment in fixed assets has slowed down significantly (+3.5% quarter-on-quarter in Q1, +0.8% in Q2, +0.6% in Q3). Moreover, CMASF estimates suggest that by 2024, the supply of machinery and equipment (real investment goods)had stopped expanding, raising the possibility that much of the reported investment growth was actually absorbed by price increases rather than real expansion.
Thus, the late-2024 industrial growth data suggests that the high key interest rate is suppressing consumer-oriented industries, while the defence sector continues to expand due to aggressive government spending. This allows Rosstat and the government to present an inflated picture of economic success. However, CMASF experts expect a significant correction in industrial output in the first months of 2025. The Central Bank’s February issue of ‘What Trends Say’ elaborates on this: while budget expenditures surged unusually high at the end of 2024, temporarily boosting industrial growth, they are expected to normalise in the following months. This will lead to a sharp slowdown across the entire industrial sector.
Once again, the military sector’s end-of-year boom provided impressive statistics for the President and Prime Minister to showcase. However, for the broader economy, it means higher inflationary pressure and an extended period of ultra-high interest rates.