- The Russian economy, boosted by military activity, is now classified as a high-income country by the World Bank.
- Russia’s GDP grew by 3.6% in 2023, driven by rebound in trade and financial sectors.
- The World Bank also upgraded Bulgaria and Palau, while the West Bank and Gaza were downgraded.
The Russian economy has defied sanctions in the two years since Moscow invaded Ukraine in February 2022, so much so that the World Bank now classifies Russia as a “high-income country.”
On Monday, the World Bank announced that it had upgraded Russia from an upper-middle-income country to a high-income country, according to a report by the financial institution’s economists.
“Economic activity in Russia was driven by a sharp increase in military-related activity in 2023,” World Bank economists wrote in their report.
Last year, Russians earned $14,250 per person based on gross national income.
The World Bank upgrade confirms reports from Russia that suggest growth is mainly due to motivated by war activities which generate demand for military goods and services, making certain sectors the winners of the Russian war economy.
Russian trade jumped nearly 7% last year, while activity in the financial and construction sectors increased by 6.6% and 3.6%, respectively.
This boosted Russia’s real GDP — which is economic growth adjusted for inflation — by 3.6%.
This development has allowed some poor Russians to improve their financial situation, complicating any calculation of how to end the war.
World Bank upgrades seven countries, downgrades West Bank and Gaza
In addition to Russia, the World Bank also upgraded Bulgaria and Palau from upper-middle-income to high-income countries. The upgrades come after several years of post-pandemic growth.
Ukraine also moved from lower-middle-income to upper-middle-income status, with real GDP growing by 5.3%, reversing a sharp decline of 28.8% in 2022.
“While the Ukrainian economy was significantly impacted by the Russian invasion, real growth in 2023 was driven by construction activity (24.6%), reflecting a significant increase in capital expenditure (52.9%) supporting Ukraine’s reconstruction effort following the ongoing destruction,” the World Bank added.
In total, the World Bank upgraded the classification of seven countries this year and downgraded only one: the West Bank and Gaza.
The West Bank and Gaza became an upper-middle-income country in 2023, but their economy has been significantly impacted by the war with Israel.
“The Middle East conflict began in October 2023 and, although its impact on the West Bank and Gaza was limited to the fourth quarter, its magnitude was nevertheless sufficient to cause a 9.2% decline in nominal GDP,” World Bank economists write. GDP in the West Bank and Gaza declined by 5.5% in real terms.
