The Zhitong Finance App learned that the Russian economy is recovering from the impact of sanctions. Russian Prime Minister Mishustin said on Friday that the Russian economy is expected to grow by 4.6% in the second quarter and 1.5% in the first half of this year. The Russian Federal Statistical Service is due to release gross domestic product (GDP) data for the second quarter later on Friday.

The Russian-Ukrainian conflict has entered its 18th month, and Russia is facing an increasingly serious labor shortage in the military recruitment process. This may prompt the government to take more selective measures to recruit people whose absence will not seriously affect production.

Russian President Vladimir Putin signed a bill last week raising the upper age limit for military recruitment from 27 to 30 and prohibiting men from leaving Russia after receiving a conscription notice. Alexander Isakov, a Russian economist at Bloomberg Economics, believes that these measures may allow “targeted mobilization” to promote short-term economic growth by reducing the impact of labor shortages, and enable the economy to reach the pre-scale of the Russian-Ukrainian conflict in mid to late 2024, that is, shortly after the scheduled presidential election.

However, he said, “Selective military recruitment is unlikely to reverse the declining trend of long-term growth.”

GDP data will show that after falling more than 4% a year ago, the Russian economy achieved growth for four consecutive quarters, breaking predictions about the long-term economic downturn caused by Russia's sanctions against the Russian-Ukrainian conflict in February 2022. Increased defense spending has boosted industrial production, while consumer demand is gaining momentum in the face of rising social support spending and rising wages.

Despite this, the exchange rate of the ruble against the US dollar is still close to 1 dollar to 100 rubles. The ruble has depreciated nearly 25% since the beginning of the year. Bank of Russia Governor Nabiullina blamed the devaluation of the ruble mainly on the worsening foreign trade situation.

Although import flows have remained stable, restrictions on Russian energy sales, including the oil price cap set by the Group of Seven (G7), have led to a decline in Russian export earnings, bringing the current account surplus to its lowest level in two years.

Natalia Lavrova, chief economist at BCS Financial Group, said that by the middle of next year, the Russian economy may return to the size before the Russian-Ukrainian conflict. She also expects Russia's economic growth rate to reach 2% in 2023.

The Bank of Russia recently raised its economic growth forecast for the full year of 2023 to 1.5-2.5%, and indicated that the output of most sectors focused on domestic demand had reached or even surpassed the level before the Russia-Ukraine conflict. The agency expects growth rates of 0.5%-2.5% next year and 1%-2% in 2025.

Policymakers warned that “the Russian economy's ability to expand production is increasingly limited by labor market conditions,” which, along with sanctions and a surge in government spending related to the Russian-Ukrainian conflict, has fueled the risk of inflation.

Evgeny Koshelev, an economist at Rosbank, said: “If we are talking about figures for the whole year, the Russian economy will surpass the level of 2021 in 2024.”