- Russia’s economy, bolstered by military activity, is now classified as a high-income country by the World Bank.
- Russia’s GDP is expected to grow by 3.6% in 2023, with the trade and financial sectors recovering.
- The World Bank also raised the ratings of Bulgaria and Palau, but downgraded the ratings of the West Bank and Gaza Strip.
Russia’s economy has defied sanctions in the two years since Moscow invaded Ukraine in February 2022, and the World Bank now classifies Russia as a “high-income country.”
The World Bank economists reported that the bank upgraded Russia to a high-income country from an upper-middle-income category on Monday.
“Russia’s economic activity was affected by a strong increase in military-related activity in 2023,” World Bank economists wrote in the report.
Last year, Russians earned $14,250 per person on a gross national income basis.
Growth is driving World Bank upgrade Driven by wartime activities These will create demand for military goods and services, making some sectors winners in Russia’s wartime economy.
Russia’s trade grew by about 7 percent last year, while activity in the financial and construction sectors increased by 6.6 percent and 3.6 percent, respectively.
This resulted in Russia’s real GDP (economic growth adjusted for inflation) increasing by 3.6%.
The developments have enriched some poor Russians economically and complicated their calculations about how to end the war.
World Bank upgrades seven countries, downgrades West Bank and Gaza
Besides Russia, the World Bank also upgraded Bulgaria and Palau from upper-middle income to high-income status, both of which came after several years of growth in the wake of the pandemic.
Ukraine also saw its real GDP grow by 5.3%, reversing a steep 28.8% decline in 2022 and moving it from lower-middle-income to upper-middle-income status.
“While the Russian aggression has significantly damaged Ukraine’s economy, real growth in 2023 will be driven by construction activity (24.6 percent) and reflect a strong increase in investment spending (52.9 percent) to support Ukraine’s reconstruction efforts in the wake of the ongoing destruction,” the World Bank added.
The World Bank has upgraded the ratings of a total of seven countries this year and downgraded only one country, that of the West Bank and Gaza Strip.
The West Bank and Gaza Strip are due to join the middle-income country league in 2023, but their economies have been heavily affected by the war with Israel.
“Although the Middle East conflict began in October 2023 and its impact on the West Bank and Gaza Strip was limited to the fourth quarter, its magnitude was sufficient to lead to a 9.2% decline in nominal GDP,” World Bank economists wrote. West Bank and Gaza Strip GDP fell 5.5% in real terms.
