Russia’s Economy Takes Heavy Damage From the War – The Average Joe

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    Russia’s Economy Takes Heavy Damage From the War

    victorlei

    March 29, 2023

    Russia’s war on Ukraine is hitting its economy hard — with major long-term impacts expected on its growth.

    Where is Russia being impacted?

    1/ Shrinking labor force: Businesses are strapped for workers as young Russians were called to war, have fled the country or are being shifted to high-priority sectors.

    Businesses are also having trouble sourcing parts in the face of sanctions — relying on older tech or China for semiconductors.

    2/ Strained government budget: Earlier this month, Russian billionaire Oleg Deripaska said Russia could run out of cash in 2024.

    But Russia’s government can still borrow domestically, and its sovereign-wealth fund still holds over $147B — which declined $28B prior to the invasion (WSJ).

    3/ Declining oil revenues: At the start of 2022, tax revenue from oil and gas made up 45% of Russia’s federal budget.

    • In the first two months of this year, Russia’s oil and gas tax revenue fell by nearly half.
    • Oil prices have fallen nearly 40% from their peak last year, and existing sanctions are forcing Russia to sell at a discount.

    Russian oil has found its way into China and India — and Russia is likely to become increasingly reliant on China.

    Former Russian Central Bank official Alexandra Prokopenko said, “Russia’s economy is entering a long-term regression.”

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