Russian economy biggest in Europe – Putin

The country has outperformed its regional peers in terms of purchasing power parity, according to the president

The Russian economy is growing at a rapid pace, and its gross domestic product (GDP) may have expanded by more than the previously estimated 3.5% in 2023, President Vladimir Putin stated on Thursday.

Speaking with business representatives of Russia’s Far East in the city of Khabarovsk, the Russian president noted that this is an “amazing” success given that the country has had to operate under unprecedented Western economic sanctions.

“It seems that we are being strangled and crushed from all sides, but we have become the first in Europe in terms of economic output. We have overtaken Germany, and they’ve dropped to fifth place [after] China, USA, India, Japan, Russia. [We’re] number one in Europe,” he stated. The president was referring to Russia having moved into fifth place among world economies – and first in Europe – if measured by GDP on a PPP (purchasing power parity) basis. PPP is a metric popular with many economists that compares economic productivity and standards of living between countries by adjusting for the differences in the cost of goods and services.

Putin noted that the drop experienced by Russia’s economy in the wake of Western restrictions last year turned out to be less significant than previously estimated.

“We always thought in 2022 we suffered from a 2.1% decline, but this in fact turned out to be 1.2%. Therefore, GDP growth [for 2023] may be higher,” he said, adding that it may even exceed 4%. Still, Putin believes there is much potential for improvement.

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“In terms of PPP, we have overtaken the whole of Europe, but with regard to per capita GDP, we still need to try harder,” the Russian leader stated.

Putin also noted that the tight monetary policy adhered to by the Bank of Russia over the past several months is a temporary measure to rein in inflation. The regulator more than doubled the key rate in 2023 to 16% in a series of consecutive hikes, even though, according to official projections, annual inflation dropped significantly in 2023 versus the previous year, to 7.5% from nearly 12%.

“The key rate in its current form is temporary in nature… When issues related to inflation are resolved, the situation will change,” Putin pledged, adding that the country will reach the target indicators in the near term. The central bank last month predicted that inflation is likely to decline to 4.0-4.5% in 2024 and stay close to 4% going forward.

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