How healthy is the Russian economy? According to official information Moscow is likely to be in a slight recession, as in 2022. Last year, Russian activity was -2.1%. It’s far from a collapse. Hydrocarbons exported abroad are the country’s main source of income. First, however The war in Ukraine and sanctions have been in Russia’s favour, as energy prices skyrocket in 2022.
Paradoxically, therefore, Moscow received more money than before the war. Since then the situation has evolved. Europe has practically stopped buying gas and oil, prices have fallen back to their usual levels. As a result, the Russian budget shows a Deficit of $45 billion in the first months of the year. After 18 months, the sanctions were still in effect.
And China’s hydrocarbon purchases cannot compensate for this. Last month, Beijing bought nearly 10 million tons of Russian oil, double what it bought in February 2022, just before the war began. But the Chinese buy at bargain prices. India, on the other hand, has recently significantly reduced its purchases.
Armor as a lifeline
The Russian economy cannot sustain itself through traditional sectorsthat literally collapse. For example, car sales fell by 40%. Rearmament, in particular the manufacture of ammunition, keeps Moscow busy. Everything is financed from the reserves formed before the invasion of Ukraine, probably in anticipation of the subsequent blockade. But reserves are not eternal.
Oligarch Oleg Deripaska, an aluminum magnate, is one of the few who spoke out against the war in Ukraine. The billionaire recently estimated that the country would be fine short of cash by 2024. Russia will soon run out of spare parts for its machines and airplanes. There could also be labor shortages in the coming months.
A glaring shortage of staff
The country lacks hands. 300,000 people are mobilized on the Ukrainian front and apparently quit their jobs. At the same time, the country experienced one of the largest waves of emigration in its history, comparable to that after the Bolshevik victory in 1917.
The most qualified such as engineers, technicians or financiers have decided to leave the company. Russia is also affected by a significant population decline. Over the past period, the number of under-35s has fallen by more than a million people. There is now Three vacancies available for one person. 40% of companies were forced to adjust their production due to staff shortages. The country’s economic future is bleak due to a lack of human capital and simply capital.
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