The Russian economy can cope with higher military spending to fund the war in Ukraine now and in the coming years, President Vladimir Putin said on Thursday, shrugging off the impact of western sanctions.

Defence spending will account for almost one-third of Russia’s total budget expenditure in 2024, government draft plans published last month showed, as Moscow diverts more resources towards prosecuting what it calls its “special military operation” in Ukraine.

Speaking at a meeting of the Valdai Discussion Club in the Black Sea resort of Sochi, Putin said Russia’s economy, which shrank 2.1 per cent last year but is on course to recover this year, had overcome challenges posed by sanctions.

“We had a budget surplus of over 660 billion roubles ($6.69 billion) in the third quarter,” said Putin.

“On the whole, we have a stable, sustainable situation. We have overcome all the problems that arose after sanctions were imposed on us and have started the next stage of development,” he said.

Higher prices for oil, the lifeblood of Russia’s economy, have helped Moscow to narrow Russia’s budget deficit in recent months.

Russia’s budget is expected to end the year in a deficit of around 1 per cent of GDP.

Putin acknowledged that Russia is facing stark labour shortages, but said that the central bank and the government have the tools to tackle any difficulties.