Vienna Institute: Growth in Russia and Non-Euro Countries Set to Increase

In its summer forecast report, the Vienna Institute for International Economic Studies (wiiw) has once again revised upwards its growth forecast for the Russian economy and pointed to the increasing gap in Europe between a growing east and a contracting west. Other data on industrial production corroborate its conclusions, showing that the sanctions policy and the “Green Deal” have become a deadly boomerang.

In the EU, countries without the euro currency are expected to grow on average 2.6% in 2024 and even 3% in 2025. The eurozone, according to the wiiw forecast, will almost stagnate in 2024, at 0.6%, and only grow by 1.6% in 2025.

As for Russia, which is increasingly geared towards a war economy, a growth rate for this year is expected to reach 3.2%, and then 3.6% in the following year. Government spending on war – around a third of the federal budget or 6% of GDP – is certainly a driver, according to the report, but it also benefits many other sectors.

While the wiiw report describes Eurozone economies as stagnating, data on industrial production for Germany and France, published July 5, show a real collapse. German industrial production fell by 2.9% in May compared to the previous month, which makes a 6.7% decline on a yearly basis. Capital goods fell more than average, with minus 4%, while construction output was down by 3.3% and the auto industry dropped more than 5%, all compared to the month of April. Industrial orders fell for the fifth month in a row, making 8.6% in a year-on-year comparison.

A sharp decline is also registered for French industrial production. According to data released by the national statistics institute, the decline was 2.7% from the previous month and 3.9% year-on-year. Many sectors were doing worse than expected, including automotive production.

As for Italy, new data on industrial production will be released on July 10, but the collapse of the automotive sector is documented in a report by the trade union Fim-Cisl. Stellantis group production – the single auto producer in Italy – collapsed 36% year on year.