A sharp drop in production and a brain drain, a secret document warns the Russian government

A sharp drop in production and a brain drain, a secret document warns the Russian government
A sharp drop in production and a brain drain, a secret document warns the Russian government

The document is the result of several months of efforts by officials and experts to evaluate the real effects of the isolation of the Russian economy, which is a consequence of the Russian invasion of Ukraine. It was drafted for a closed-door meeting of top Russian officials on August 30, Bloomberg reports.

Two of the three scenarios in the paper assume that the economic downturn will accelerate next year and the economy will return to pre-war levels by the end of the decade at the earliest.

The most pessimistic scenario assumes that the economy will bottom out in 2024, when it will be 11.9 percent weaker than last year. All three scenarios assume that the pressure caused by sanctions will increase. Europe’s shift away from Russian gas and oil could disrupt Moscow’s ability to supply the domestic market, according to the document.

The material also points out that Russia is now facing a blockade that affects virtually all forms of transport. He also points to technological and financial constraints and estimates that up to 200,000 IT professionals could leave the country by 2025.

At the same time, Russian officials say publicly that the effects of the sanctions are milder than expected, and that the decline in the economy could be less than three percent this year and slow down next year. Russian Economy Minister Maxim Reshetnikov predicted today, according to Russian agencies, that Russia’s gross domestic product (GDP) will fall by 2.9 percent this year.

For next year, the ministry now expects the decline to slow down to 0.9 percent, and in 2024 it expects a return to growth, which should amount to 2.6 percent. Reshetnikov also said the economy is on track to grow at more than three percent after 2024. In August, the ministry forecast that the economy would shrink by 4.2 percent this year and 2.7 percent next year.

The confidential document, cited by Bloomberg, calls for a series of measures to support the economy and mitigate the impact of sanctions. The support should ensure that the economy returns to pre-war levels in 2024 and subsequently shows stable growth. But these measures include a number of steps the Russian government has taken over the past decade, when economic growth has largely stagnated even without sanctions.

The document warns that within a year or two, Russia faces a drop in output in a number of export-oriented industries, including oil, gas, metals, chemicals and wood products. According to the document, although some recovery is possible later, “these sectors will cease to be the engine of the economy”.

A complete interruption of gas supplies to Europe could deprive the Russian Federation of tax revenues of up to 400 billion rubles (over 160 billion crowns) per year. At the same time, it will not be possible to fully compensate for the shortfall in supplies with the help of new markets, even in the medium term, the document warns.

It also warns that these developments will require production cuts, which will threaten the Kremlin’s plans to increase domestic gas supplies. The European Union’s plans to end Russian oil imports could also lead to a decline in Russian production and supply problems for the Russian market, according to the document.

According to the document, the main short-term risk related to restrictions on imports is the suspension of domestic production due to a lack of imported raw materials and components.

In the longer term, the inability to repair imported equipment could lead to a permanent limitation of economic growth. “There are simply no alternative suppliers for some key imports,” the document says.

Limited access to Western technology could put Russia one to two generations behind current standards, as the country will have to rely on less advanced alternatives from China and Southeast Asia, according to the document.

The material also warns that the sanctions will require a review of a number of goals that Russian President Vladimir Putin announced before the war, including plans to boost population growth and increase life expectancy.

The article is in Czech

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