MOSCOW (Reuters) – The Russian economy can cope with higher military spending to fund the war in Ukraine now and in the coming years, President Vladimir Putin said on Thursday, shrugging off the impact of Western sanctions.
Defence spending will account for almost one third of Russia’s total budget expenditure in 2024, government draft plans published last month showed, as Moscow diverts more resources towards prosecuting what it calls its “special military operation” in Ukraine.
Speaking at a meeting of the Valdai Discussion Club in the Black Sea resort of Sochi, Putin said Russia’s economy, which shrank 2.1% last year but is on course to recover this year, had overcome challenges posed by sanctions.
“We had a budget surplus of over 660 billion roubles ($6.69 billion) in the third quarter,” said Putin.
“On the whole, we have a stable, sustainable situation. We have overcome all the problems that arose after sanctions were imposed on us and have started the next stage of development,” he said.
Higher prices for oil, the lifeblood of Russia’s economy, have helped Moscow to narrow Russia’s budget deficit in recent months after Western price caps and an embargo on seaborne oil exports squeezed energy revenues.
Russia’s budget is expected to end the year in a deficit of around 1% of gross domestic product (GDP).
Putin acknowledged that Russia is facing stark labour shortages, but said that the central bank and the government have the tools to tackle any difficulties.
Russian authorities have been unable to stop the rouble from tumbling past 100 to the dollar and losing around a quarter of its value this year though. Successive rate hikes – the key rate now stands at 13% – have stopped the rot, but not turned the tide.
Analysts polled by Reuters last week said they expect Russia’s economy to grow at a slow pace in the years ahead, with double-digit interest rates to stay until 2025.
($1 = 98.6000 roubles)
(Reporting by Vladimir Soldatkin and Guy Faulconbridge; Writing by Maxim Rodionov and Alexander Marrow; Editing by Andrew Osborn)
