Russian defense industry will increase military production by a third

Police examine the collected fragments of Russian missiles. Photo: Libkos/AP

The Russian government expects huge spending to boost the military industry by one-third as military action against Ukraine intensifies.

Bloomberg News predicts that aircraft and rocket engine parts will contribute more than production of computers, electronics and optics jumps by a third.

Fabricated metal products will rise by more than a quarter, driven in part by weapons and ammunition, forecasts say.

These categories are expected to lead to overall growth of 4%. in industrial production as Moscow seeks to replenish supplies of materials used up or destroyed in the war against Ukraine.

What the Kremlin expected last year to be a lightning strike against its democratic neighbor turned out to be an unexpected reversal.

Russian troops were initially driven back and are now dug in in the south and east of the country.

Liam Peach of Capital Economics estimates the Russian economy will grow 2.5% this year after data showed industrial output rose 5.4% in August compared with the same period last year.

“Another large increase in government spending looks almost inevitable next year amid ongoing hostilities and ahead of presidential elections in March,” he said.

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“This will increase inflation risks and keep pressure on the central bank to further increase interest rates.»

1608 Bank rate

This comes after the European Bank for Reconstruction and Development (EBRD) published a weaker forecast, estimating Russia's economy will grow by 1.5% this year and 1% in 2026.

Analysts say that Russia's high government spending has «overheated the economy,» sucking in imports even as Western countries have placed a cap on oil prices. its export earnings.

“These problems have put pressure on the ruble, which has weakened by 30% against the US dollar in 2023, further increasing inflationary pressures,” the EBRD said.

Russia has increasingly sought to avoid Western channels of trade and finance.

One fifth of its imports last year were invoiced in Chinese yuan, up from 3% in 2021 as Russia and other autocracies are looking for ways to reduce their dependence on the US dollar.

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