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- Russia’s war on Ukraine has fueled a massive brain drain that will cripple Putin’s economy.
- By some estimates, 80% of those leaving Russia are college educated, and 86% are under the age of 45.
- Russia’s GDP measured on the basis of purchasing power parity will overtake that of Indonesia in 2026.
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Russia’s war on Ukraine has triggered a massive brain drain, and the ramifications for the economy are becoming increasingly apparent.
Since Vladimir Putin launched the invasion in February 2022, there has been a spurt in emigration from Russia, with some estimates up to 1 million people having fled. A recent analysis by Policy Forum Re:Russia narrows the number to 817,000–922,000.
This has contributed to a record labor shortage, with 42% of industrial firms unable to find enough workers in July, up from 35% in April.
The emigration structure of Russia also points to an exodus of the best and brightest from the country. While the barrage of Western sanctions encouraged many to leave for economic reasons, others fled to avoid military service, skewing the numbers toward young Russians.
Workers under the age of 35 now make up less than 30% of the labor force, the lowest on record 20 years ago.
And according to a report by the French Institute of International Relations, 86% of those leaving Russia are under 45, and 80% have a college education. A Kremlin official last year estimated that at least 100,000 IT professionals would move out of Russia in 2022.
Furthermore, the data also showed that the fled Russians were significantly wealthier, as about 11.5% of personal savings held in Russian banks at the end of 2021 were transferred abroad in 2022, amounting to about 4 trillion rubles ($ 41.5 billion).
The dwindling population of skilled professionals is a bad sign for the Russian economy. The Atlantic Council said in a report that when high-skilled workers leave, economic opportunities go with them, which will bring Russia’s standard of living to the level of other former Soviet states.
Without migration to fill the labor gap, and with declining birth rates, the Russian economy is expected to shrink.
In fact, the Atlantic Council estimates that Russia’s GDP, as measured by purchasing power parity (PPP), will overtake that of Indonesia in 2026, almost two years earlier than it would have been if Putin had not launched his war on Ukraine. By then, they will be ranked as the world’s sixth and seventh largest economies by PPP.
Of course, Western sanctions limiting Russia’s access to advanced technologies will also have an impact on GDP. But drawing comparisons with Indonesia, the report pointed to a common deciding factor.
The council wrote, “But both Russia’s decline and Indonesia’s rise are largely driven by the same thing: people. Russia is suffering from a rapid brain drain while Indonesia’s labor force is growing.”
“Notably, Indonesia’s educated professional class is growing while Russia’s is shrinking. It is this paradox that makes their soon-to-be-swapped list of the world’s largest economies remarkable. The center is changing.”
It said that not only is Indonesia’s labor force growing, but the influx of highly skilled workers has helped boost personal consumption standards in the country.
As a result, China is paying attention to Indonesia’s increasing spending power and trade relations between the two countries are expected to strengthen, the Council said. This could further reduce growth prospects for Russia, which has become more dependent on trade with Beijing since the start of the war.
“While Russia may be an important export market for Chinese producers at the moment as it rushes to fill the gaps left by the exit of Western companies, its long-term growth prospects are bleak at best,” the report said. likely to be negative.”
Source
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