Russia’s government expects vast spending to boost its military industries by one third as its war effort against Ukraine ramps up.
According to forecasts seen by Bloomberg News, parts for aircraft and rocket engines will contribute to a jump of more than one third in production of computers, electronics and optics.
Finished metal goods will grow by more than one quarter, in part because of arms and ammunition, the forecasts said.
These categories are expected to drive an overall rise of 4pc in industrial production, as Moscow seeks to replenish stocks of material used up or destroyed in its war against Ukraine.
What the Kremlin had expected to be a lightning strike against its democratic neighbour last year turned into a surprise reversal.
Russian troops were initially driven back and are now dug in in the south and east of the country.
Liam Peach at Capital Economics estimates Russia’s economy is on course to grow by 2.5pc this year, after figures showed industrial production in August was up 5.4pc on the year.
“Another large rise in government spending looks almost certain next year amid the ongoing war effort and ahead of the presidential election in March,” he said.
“This will add to inflation risks and maintain pressure on the central bank to raise interest rates further.”
It comes after the European Bank for Reconstruction and Development (EBRD) issued a weaker forecast, estimating Russia’s economy would grow by 1.5pc this year and 1pc in 2026.
Its analysts said Russia’s high government spending “has resulted in an overheating of the economy”, sucking in imports even as Western price caps on oil hit its export revenues.
“These challenges have weighed on the rouble, which has weakened by 30pc against the US dollar in 2023, further adding to inflationary pressures,” the EBRD said.
Russia is increasingly trying to avoid Western channels of trade and finance.
One fifth of its imports last year were invoiced in China’s yuan, up from 3pc in 2021, as Russia and other autocracies seek ways to reduce reliance on the US dollar.
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