Russia’s war on Ukraine has caused a massive brain drain, and the damage it will do to the economy is becoming increasingly clear.
Since Vladimir Putin launched the invasion in February 2022, emigration out of Russia has exploded, with some estimates putting the exodus at 1 million. A recent analysis by political platform Re: Russia narrows the number to 817,000-922,000.
This contributed to a record labor shortage, with 42% of industrial firms unable to find enough workers in July, up from 35% in April.
The composition of Russia’s emigration also shows that it is the best and the brightest who are fleeing the country. While the barrage of Western sanctions spurred many to leave for economic reasons, others fled to avoid conscription, skewing the numbers toward younger Russians.
Workers under the age of 35 now make up less than 30% of the workforce, the lowest level recorded in 20 years.
And according to a report by the French Institute of International Relations, 86% of those who left Russia are under the age of 45, and 80% have higher education. At least 100,000 IT professionals have moved out of Russia in 2022, a Kremlin official estimated last year.
The data also shows that the Russians who fled were significantly richer, as nearly 11.5% of personal savings that were in Russian banks at the end of 2021 were transferred abroad in 2022, which amounted to about 4 trillion rubles ($41.5 billion).
A shrinking population of skilled professionals is bad for the Russian economy. As high-skilled workers leave, economic opportunities disappear with them, bringing Russia’s standard of living to the level of other former Soviet states, according to a report by the Atlantic Council.
Without migration to fill the labor shortage, and combined with a declining birth rate, Russia’s economy is expected to shrink.
In fact, the Atlantic Council estimated that Russia’s GDP, as measured by purchasing power parity (PPP), would fall behind Indonesia’s in 2026, almost two years earlier than would have been the case had Putin not started his war against Ukraine. By then, they will be swapping places as the world’s sixth and seventh largest economies by PPP.
Certainly, Western sanctions limiting Russia’s access to advanced technology will also weigh on GDP. But when compared to Indonesia, the report points to a common deciding factor.
“But Russia’s decline and Indonesia’s rise are largely driven by the same thing: people. Russia is suffering from an acute brain drain while Indonesia’s labor force is growing,” the Council wrote.
“In particular, Indonesia’s educated professional class is growing while Russia’s is shrinking. This contrast is what makes their recent shift in the list of the world’s largest economies notable. The center of global economic gravity is shifting.”
Not only is Indonesia’s labor force expanding, but the influx of highly skilled workers has helped raise the country’s private consumption standards, it added.
As a result, China is noticing Indonesia’s growing spending power and trade ties between the two countries are likely to tighten, the Council said. That could further cloud growth prospects for Russia, which has become increasingly dependent on trade with Beijing since the start of the war.
“While Russia may be an important export market for Chinese manufacturers right now as it rushes to fill the gaps left by the withdrawal of Western companies, its long-term growth prospects are stagnant at best and more likely negative.” , the report said.
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2023-09-05 19:20:00
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