Putin’s war to undo 15 years of progress for the Russian economy | Russo-Ukrainian War
Russia’s invasion of Ukraine last month sent the ruble crashing and threw global supply chains and commodity prices into chaos.
Russia is set to erase 15 years of economic gains by the end of 2023 after its invasion of Ukraine triggered a slew of sanctions and prompted companies to pull out of the country, according to the Institute of InternationalFinance.
The economy is expected to contract 15% in 2022, followed by a 3% decline in 2023, leaving gross domestic product where it was about 15 years ago, economists Benjamin Hilgenstock and Elina Ribakova wrote. in a preliminary assessment of the impact of the war. , noting that further sanctions could change their view.
“A sharp decline in domestic demand will likely play a crucial role while a slump in imports should offset the decline in exports, leading to a slightly positive contribution from net foreign demand,” the economists wrote. “However, if further sanctions in the form of trade embargoes were implemented, exports could fall more than we currently expect.”
Russia’s invasion of Ukraine last month sent the ruble crashing and threw global supply chains and commodity prices into chaos, while sending businesses out of the country in droves. French carmaker Renault SA is one of the latest companies to pull out, announcing it is halting operations at its Moscow plant and saying it is considering the future of a longtime Russian company called AvtoVaz.
Even after the immediate hit to the Russian economy, the economy would suffer for years from a so-called “brain drain” – the exodus of educated, middle-class Russians with the financial means to leave the country – and US and European exports. controls on technology, including microelectronics, which will hamper technological development in Russia for years, according to the IIF.
At the same time, the “self-punishment” of foreign companies that no longer want to do business with Russia will lead to a weakening of important sectors of the Russian economy, according to the report.
“The negative effect on the medium to long-term economic outlook could be even greater,” the IIF economists wrote.
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