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 significant 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.
The World Bank’s upgrade confirms reports from Russia suggesting that growth was driven primarily by wartime activities generating demand for military goods and services, with some sectors of Russia’s wartime economy emerging as winners.
Russia’s trade grew nearly 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.
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.
In total, the World Bank has upgraded the ratings of seven countries this year and downgraded only one territory, the West Bank and Gaza Strip.
The West Bank and Gaza Strip are set to become upper-middle-income areas in 2023, but their economies have been heavily affected by the war between Israel and Hamas.
“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.