In its new Macroeconomic Outlook Report on Russia, released on 2 April 2024, GlobalData intelligence anticipates Russia’s expanding war economy to double down on its so-called ‘Special Military Operation’ in Ukraine.
In November 2023, Russian President Vladimir Putin approved a significant rise in military spending, with draft budget plans earmarking about 30% of fiscal expenditure for the armed forces in 2024.
The country aims to substantially boost defence in 2025 as well, with plans for an increase to 6% of GDP from 3.9% in 2023 and 2.7% in 2021.
“This represents a record increase,” GlobalData suggests, as the defence budget inflates to Rbs36.6trn ($432.4bn) from $43.1bn in 2022. “The allocation signals a notable surge in defence investment, with spending on defence and security combined projected to make up around 40% of the total budget expenditure in 2024.”
In addition, GlobalData indicated that the unemployment rate in Russia declined to 2.9% in January 2024, compared to 3.6% the previous year. This decline is primarily attributed to a shortage of skilled workers, resulting from emigration and military mobilisation related to the conflict in Ukraine.
The number of unemployed individuals decreased by 139,000 from the previous month to reach a record low of 2.2m. GlobalData forecasts the unemployment rate of Russia to decrease to 3.2% in 2024 from 3.35% in 2023
Avdivvka and the Black Sea
Since Russia’s five-month-long offensive to capture Avdivvka in the eastern Donetsk region succeeded earlier this year, the effort demonstrated localised Russian aerial superiority.
This would likely be the first time this has happened in the war in Ukraine, a conflict marked by Mutual Air Denial, where neither side’s air forces have been able to operate outside of territory supported by ground troops. Government spending may well be allocated to expand on this breakthrough in the skies.
However, Russia’s military budget will also need to shore up the Navy’s problems in the Black Sea, where Ukrainian uncrewed surface vessels have destroyed a significant percetage of its Fleet.
Russia has since withdrawn at least ten Black Sea Fleet vessels from Sevastopol port in the annexed territory of Crimea following a succession of Ukrainian missile strikes.
