A drop in Russian defence sector spending contributed to a surprise slump in the economy at the end of 2017, analysts and officials said, which has dampened an economic recovery in the countdown to a March presidential election. Russia's oil-dependent economy was seen officially as growing by at least 2 percent last year, bringing welcome relief to voters still feeling the pinch of a two-year recession ahead of the March 18 election.
But data from the state statistics service this month showed gross domestic product (GDP) grew only by 1.5 percent in 2017 after industrial output - a major component - unexpectedly fell 3.6 percent year-on-year in November. Industry analysts and government officials, some of whom spoke on condition of anonymity because they were not authorised to talk to the media, told Reuters the collapse in industrial output was caused by a slowdown in Russian defence spending.
Some of the people Reuters spoke to have access to official data on defence spending, which includes expenditure on arms and equipment and which the government does not make publicly available. "We have lived through a rather serious economic downturn in the second half of 2017," said Kirill Tremasov, who previously ran the economy ministry's forecasting department and is now head of research at Loko-Invest.
"There was a slump in industrial output, apparently in the defence sector, which was affected by a fall in state defence procurement," he said. The fall appeared to be a technical hiatus as the government switches from one procurement programme to another.
The previous defence order programme ended at the end of 2017 and the new one, to run from 2018 to 2027, has yet to be signed off by President Vladimir Putin. Some of the government officials have called for lower military spending to free up funds for social programmes such as education and healthcare.
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