Russia economy: World Bank upgrades Russia to ‘high-income country’

• Russia’s economy, boosted by military activity, is now classified as high-income by the World Bank.
• Russia’s GDP grew 3.6% in 2023, with trade and financial sectors rebounding.
• The World Bank also upgraded Bulgaria and Palau, while the West Bank and Gaza were downgraded.

Russia’s economy has defied sanctions in the two years since Moscow invaded Ukraine in February 2022 — so much so that the World Bank is now classifying Russia as a “high-income country.”

On Monday, the World Bank announced it has upgraded Russia from an upper-middle-income country to a high-income country, according to a report from the financial institution’s economists.

“Economic activity in Russia was influenced by a large increase in military-related activity in 2023,” World Bank economists wrote in their report.

Last year, Russians earned $14,250 per person on a gross national income basis.

The World Bank’s upgrade confirms reports from Russia that suggest the growth is primarily driven by wartime activities that generate demand for military goods and services, making some sectors winners in Russia’s wartime economy.

Russia’s trade jumped by nearly 7% last year, while activities in the financial sector and construction grew by 6.6% and 3.6%, respectively.

This boosted Russia’s real GDP — which is economic growth adjusted for inflation — by 3.6%.

The development has made some poor Russians better off financially, complicating any calculus over how to end the war.

The World Bank upgraded seven countries, downgraded West Bank and Gaza

Other than Russia, the World Bank also upgraded Bulgaria and Palau from upper-middle-income to high-income countries. Their upgrades came after several years of post-pandemic growth.

Ukraine also moved up from a lower-middle-income country to upper-middle-income country as real GDP grew 5.3% — reversing a steep 28.8% slump in 2022.

“While Ukraine’s economy was significantly impaired by Russia’s invasion, real growth in 2023 was driven by construction activity (24.6%), reflecting a sizable increase in investment spending (52.9%) supporting Ukraine’s reconstruction effort in the wake of ongoing destruction,” the World Bank added.

In all, the World Bank upgraded the classification of seven countries this year and downgraded just one country: West Bank and Gaza.

West Bank and Gaza became an upper-middle-income country in 2023, but its economy was significantly impacted by its war with Israel.

“The conflict in the Middle East began in October 2023, and while the impact on West Bank and Gaza was limited to the fourth quarter, its scale was nonetheless sufficient to lead to a 9.2% drop in nominal GDP,” the World Bank economists wrote. West Bank and Gaza’s GDP declined 5.5% in real terms.