Kristalina Georgieva, managing director of the International Monetary Fund, at a press conference at IMF headquarters on April 14, 2023.

Kevin Dietsch | Getty Images News | fake images

The head of the International Monetary Fund warned that the Russian economy still faces significant headwinds despite recently receiving a growth boost from the Washington-based institution.

Russia’s economy has proven surprisingly resilient amid waves of Western sanctions in the nearly two years since it launched its full-scale invasion of Ukraine.

In late January, the International Monetary Fund more than doubled its forecast for the country’s pace of economic growth this year, raising it from 1.1% in October to 2.6%.

Despite this, IMF Managing Director Kristalina Georgieva sees more problems ahead for the country of approximately 145 million people.

Speaking to CNBC’s Dan Murphy at the World Government Summit in Dubai, Georgieva described what she believed was driving Russia’s growth and why the projected figure doesn’t tell the full story.

“What it tells us is that this is a war economy in which the State (which, remember, had a very considerable cushion, built over many years of fiscal discipline) is investing in this war economy. Yes We look at Russia, today, production increases, [for the] military, [and] consumption drops. And that’s pretty much what the Soviet Union used to be like. High level of production, low level of consumption.”

Russian defense spending has skyrocketed since the war began. Last November, Russian President Vladimir Putin approved a state budget That increased military spending to about 30% of fiscal spending, representing an increase of almost 70% from 2023 to 2024.

Defense and security spending is expected to account for around 40% of Russia’s total budget spending this year, according to an analysis. by Reuters.

Watch the full CNBC interview with IMF Managing Director Kristalina Georgieva

At the same time, however, more than 800,000 people have left Russia, according to estimates prepared by exiled academics and compiled last October. Many of those who fled are highly skilled workers in fields such as information technology and science.

“In fact, I think the Russian economy is going through very difficult times because of the departure of people and the reduced access to technology that comes with sanctions,” Georgieva said.

“So while this number seems good, there is a bigger story behind it, and it’s not a very good story.”