Christopher Gavin
Despite a heavy barrage of Western sanctions put in place after its 2022 invasion of Ukraine, Russia's economy has nevertheless persevered — and is now thriving.
In a report released Tuesday, the Russian Central Bank said the nation's banks saw record profits in 2023, generating the equivalent of $37 billion — 16 times higher than the previous year, according to the Financial Times.
Alexander Danilov, the head of the CBR’s banking regulation department, even admitted the cashflow came as "somewhat of a surprise," FT reported.
Meanwhile, as Moscow stands poised to enter a third year of a grinding war in Ukraine, Russia's economy is forecasted to get a 2.6% boost this year – doubling prior expectations set in October, the International Monetary Fund indicated Tuesday.
So, what's driving the numbers?
Bank profits were largely helped by Russians eager to take advantage of government-subsidized mortgages, a program aimed at driving up consumer demand, according to the FT.
Homeowners can get interest rates of up to 8% under the subsidized loans, while rates in the wider market are approximately 14%.
The number of mortgages jumped by 34.5% last year, with the subsidized offerings making up more than half of all new home loans, FT reported.
The mortgage rush was driven by Russians concerned the subsidies would end and those seeking to invest the de-valued rouble into real estate.
Lending has also benefitted from Russians in need of financing as they buy up assets being dumped by exiting Western companies pulling their business in the wake of the war.
The CBR reported banks' aggregate corporate credits portfolio jumped by more than 20% last year with 500 billion rubels ($5.6 billion) in new loans tied to deals involving the migrating foreign companies, according to FT.
Meanwhile, the IMF's projections for Russia's economic growth in 2024 cite continued massive military spending as a driving factor.
Then there's the oil.
Russia also reportedly raked in tens of billions of dollars in oil and gas revenues in 2023 thanks to loopholes in the sanctioning on the country's energy industry.
“It is definitely the case that the Russian economy has been doing better than we were expecting and many others were expecting,” Pierre-Olivier Gourinchas, the IMF’s chief economist, told FT.
According to Gourinchas, the forecasts are "somewhat preliminary," however, as the IMF tried to validate Russian figures.
Gourinchas also warned longer-term growth of Russia's economy is likely to be lower than it was before the war.
Still, Russian President Vladimir Putin has boasted about Russia's surprising economic performance.
He claimed last year's growth was driven by record construction, agriculture, tourism, freight transport, industry consumer investment and spending, according to FT.
But the nation's senior economic officials caution that the spending could become a detriment.
"If you try to drive faster than the car's design allows and step on the gas as hard as you can, then the engine will overheat sooner or later and we won't get far," central bank governor Elvira Nabiullina said last month.
"We might go fast, but not for long."
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