Putin extols Russian economic performance, defends military spending

President Vladimir Putin on Friday cited positive data points to laud Russia’s economic health and said surging defence spending was needed to boost national security, as Moscow grapples with the cost of fighting in Ukraine.

Putin, speaking at the plenary session of Russia’s flagship St Petersburg International Economic Forum, said the public finances were generally balanced, putting the $42-billion budget deficit so far this year largely down to bringing forward some planned expenditures.

Analysts and data, however, suggest that slumping energy revenues and soaring military spending have played a key role.

“Naturally, additional funds were needed to strengthen defence and security, to purchase weapons,” Putin said, without mentioning Ukraine specifically. “We were forced to do this to protect our country’s sovereignty.

“I should say that on the whole this justifies itself from an economic point of view,” Putin added.

Putin used data to make his argument for Russia’s positive economic prospects, forecasting gross domestic product (GDP) growth of up to 2% this year, citing record low unemployment and low inflation relative to last year’s double-digit acceleration.

That would still leave GDP smaller than at the end of 2021, after last year’s contraction of 2.1%. The International Monetary Fund forecasts 2023 growth of 0.7%, and expects global isolation and lower energy revenues to dampen Russia’s prospects for years to come.

With hundreds of thousands of working age men conscripted last year and hundreds of thousands more fleeing the country to avoid mobilisation, unemployment is at a record low 3.3%. The central bank has repeatedly warned that a labour shortage is exacerbating inflationary risks, and analysts have named it one of the most significant drags on Russia’s economic progress.