Russia-Ukraine war: Russian economy holds up as Ukraine suffers ravages of conflict

October 16, 2024

After nearly two years of Russia-Ukraine war and despite all odds, the Russian economy has shown resilience in the face of the war on Ukrainian territory, while the Ukrainian economy has been significantly weakened by the conflict.

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A little more than two years ago, the Russia-Ukraine war broke out. Western countries that had placed numerous sanctions in 2014 following the incorporation of the Crimean peninsula into the Russian Federation, calculated that this country would collapse within a few months after hostilities began.

This forecast did not come true and surprisingly, in 2023, Russia’s GDP was USD $1.99 trillion, a drop compared to 2022, where it reached USD $2.27 trillion. The International Monetary Fund (IMF) projects a slight recovery by 2024, with a GDP of $2.05 trillion. but when analyzing Russian GDP by purchasing power parity.

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Russia is economically resilient

In 2023, Russian GDP per capita in purchasing power parity (PPP) was USD $35,401, lower than in 2022 (USD $32,887), expected to rise in 2024 to USD $38,292 meaning it has not been substantially altered by effects of the Russia-Ukraine war.

Inflation reached 5.86% in 2023, with a projected increase to 6.87% in 2024. This figure has fluctuated significantly since 2022, when it peaked at 13.75%.

Investment remained at around 26.76% of GDP in 2023, an increase from the previous year when it was 22.77% of GDP. It is expected to close at around 26.74% of output in 2024.

Unemployment in 2023 was 3.16%, a reduction of this indicator compared to 2022 when it was 3.94%. It is expected to continue its recovery and close at 3.11% in 2024.

During 2023, exports of Russian goods and services presented a drop of -15.60%, a greater drop than that recorded in the previous year (-8.40%). In 2024 a recovery of 6.54% in external sales is forecast.

Russian merchandise exports in 2023 reached USD $407.8 billion. The main goods exported by Russia in 2023 were oil and oil products (USD $260.5 billion), pearls and precious or semiprecious stones (USD $20.7 billion), iron and steel (USD $15.3 billion), fertilizers (USD $15.2 billion), and grain (USD $11.7 billion).

Imports of goods and services during 2023 grew 15.96%, following a -14.59% decline in 2022. This year, external purchases are expected to grow moderately (2.70%).

The current account presented a surplus of USD $50.56 billion in 2023, equivalent to 2.53% of GDP. This presents a significant reduction with respect to 2022 when the balance was USD $238.03 billion (10.47% of GDP).

In 2023 the public debt in Russia as a percentage of GDP was 19.6% and in 2024 it is expected to close with a moderate increase at 20.7%.

The Russia-Ukraine war does not seem to have significantly damaged the Russian economy and, on the contrary, it is the fourth largest economy in the world after the United States, China and India in the midst of hostilities that have caused more than 800,000 deaths on both sides.

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Ukraine suffers economic consequences of the Russia-Ukraine war

Ukraine’s economy is significantly smaller and has been hurt by the Russia Ukraine war with a GDP of USD $177.2 billion in 2023, with projected growth to USD $188.9 billion in 2024. This represents a slight recovery after the drop in GDP to $160.5 billion in 2022.

GDP per capita in PPP in 2023 was USD $14,704, an increase compared to 2022 (USD $12,805) and with a projection of USD $15,463 for 2024.

In 2023, inflation in Ukraine was 12.85%, with an expected moderation to 6.45% in 2024. In 2022, inflation reached 20.18%, highlighting the impact of the Russia-Ukraine war on the economy.

In 2023, investment represented 16.34% of GDP, with a projection that expects an increase to 17.64% in 2024.

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Unemployment in 2023 was 19.07%, down from 24.52% in 2022. It is expected to close in 2024 still at a high indicator of 14.51%.

During 2023 Ukrainian exports of goods and services presented a drop of -16.07%, a smaller drop than that recorded in the previous year (-43.84%). In 2024 external sales are forecast to recover by 18.48%.

Ukraine’s merchandise exports in 2023 reached USD $36.2 billion. The main Ukrainian goods exported in 2023 were cereals (USD $8.3 billion), fats and oils (USD $5.6 billion), oilseeds and oleaginous fruits (USD $2.8 billion), iron and steel (USD $2.6 billion) and Ores, slag and ash (USD $1.8 billion).

Imports of goods and services during 2023 grew 21.05%, after a decrease of -24.73% in 2022. This year external purchases are expected to increase by 10.98%.

The current account in Ukraine presented in 2023 a deficit of USD $9.75 billion, equivalent to 5.50% of GDP. This presents a significant reduction compared to 2022 when the balance was in surplus by USD $7.97 billion (4.96% of GDP).

Public debt in Ukraine during 2023 as a percentage of GDP was 82.8% and is expected to increase to 94.0% in 2024.

Official IMF data based on coarse data establishes the weakness of the Ukrainian economy but does not reflect the magnitude of the Russian-Ukrainian war, the destruction of the energy infrastructure, migration and export difficulties that have affected the world food market.