As the world watches Russia’s shocking invasion of Ukraine, the country’s economy is depleting on the sly. Here’s why Russia faces a crisis of its own.
Massive Exodus Rocks Russia
Since Russia’s invasion of Ukraine, mass emigration has become a huge problem, with estimates reaching as high as 1 million people already searching for a new life elsewhere.
Labor Shortages Reach Alarming Heights
This mass exodus led to a record labor shortage, with a large number of businesses struggling to find enough workers to get the job done.
Worrying Statistics Show Business Failures
In July, a staggering 42% of these firms couldn’t meet their staffing needs, a significant jump from just 35% in April.
Brain Drain of the Brightest
The composition of those leaving Russia suggests that the best and brightest were fleeing.
While Western sanctions played a role in driving emigration for economic reasons, others left to evade military service, causing a skew towards younger Russians.
A New Low for Young Russians
Workers under 35 now make up less than 30% of the labor force, the lowest in 20 years.
A Youthful Exodus
According to a report from the French Institute of International Relations, a whopping 86% of those leaving Russia were under 45, and 80% held a college degree. Around 100,000 IT professionals fled in 2022, according to Kremlin estimates.
Wealthy Russians Flee
Data also revealed that those who left Russia were wealthier, and 11.5% of personal savings in Russian banks at the end of 2021, totaling about 4 trillion rubles ($41.5 billion), were transferred abroad in 2022.
Russia’s living standards are now down to that of other former Soviet states since this huge number of skilled workers fled after the invasion.
Russia’s Shrinking Economy
With migration unable to fill the labor gap and coupled with declining birth rates, the Russian economy is expected to shrink.
Falling Behind Indonesia
The Atlantic Council estimated that Russia’s GDP, measured by purchasing power parity (PPP), will fall behind Indonesia’s by 2026.
Russia’s Slide vs. Indonesia’s Ascent
The Council drew a parallel between Russia’s decline and Indonesia’s rise, both fueled by the movement of people.
The Difference Is Night and Day
Russia faces a loss of workers, while Indonesia’s labor force is expanding – particularly its educated professional class – marking a significant shift in the world’s economic landscape.
Growing China Friendship
Indonesia’s growing labor force and influx of skilled workers boosted private consumption standards.
This, in turn, has attracted China’s attention, with expectations of tighter trade ties between the two countries.
Russia’s Losing Battle With China
As Indonesia’s spending capacity increases, China is eyeing the opportunity. Trade ties between the two nations are set to strengthen, further complicating Russia’s growth prospects, especially as it becomes increasingly reliant on trade with Beijing.
A Bleak Future for Russia
While Russia might currently serve as an important export market for Chinese producers, its long-term growth prospects appear negative, according to the report.
Impact on Global Economy
The ripple effect of Russia’s emigration issues is not confined to its borders.
It’s a global issue with potential consequences for the world economy.
As the world grapples with the consequences of Russia’s brain drain, the future remains uncertain, with potential ramifications for years to come.
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