Russian growth dips in second quarter as inflation rises

MOSCOW

The pace of Russia's economic growth slowed in the second quarter of 2024, official data have shown, amid concerns over stubborn inflation and warnings of "overheating."

Gross domestic product (GDP) dipped from 5.4 percent in the first quarter to 4 percent from April to June, the lowest quarterly result since the start of 2023 but still a sign the economy is expanding.

Inflation meanwhile showed no signs of easing, with consumer prices rising 9.13 percent year-on-year in July, up from 8.59 percent in June and the highest figure since February 2023.

The Kremlin has heavily militarised Russia's economy since sending troops into Ukraine in February 2022, spending huge sums on arms production and on military salaries.

That spending boom has fuelled economic growth, helping the Kremlin buck initial predictions of a recession when it was hit with unprecedented Western sanctions in 2022.

But it has sent inflation surging at home, forcing the Central Bank to raise borrowing costs.

The bank raised its key interest rate to 18 percent last month, the highest level since an emergency hike in February 2022 took it to 20 percent.

The bank's governor Elvira Nabiullina said the economy was showing signs of "overheating" and pointed to difficulties with international payments, an effect of Western sanctions, as another factor driving up inflation.

Russia is set to spend almost nine percent of its GDP on defence and security this year, a figure unprecedented since the Soviet era, according to President Vladimir Putin.