Economy of Russia

The flag of Russia

Russian GDP nominally rose more than any G7 country in 2023. The average Russian household ended the year with about 18% more money in the bank than a year earlier. Sberbank, Russia’s largest state-controlled bank, posted a 5.5-fold year-on-year net profit jump to a record high of 1.5 trillion rubles (USD $16.3 billion). The defense industry employs 3.5 million people and many factories have doubled their workforce since the beginning of the SMO. The economic boom is result of defense stimulus spending, Keynesian economics, a government deficits. Compared to the United States, Russia is a piker in the debt markets. The U.S. gas $35 trillion national debt and growing), nearly a $1 trillion dollar defense budget, does not produce tanks, failed to produce a functional hypersonic missile, incapable of matching Russia’s output of artillery shells, and has become largely a service economy.

Russia's labor crisis

See also: Russia's labor crisis

The Center for European Policy Analysis reported on March 9, 2024:

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Towards the end of last year, experts from the Institute of Economics of the Russian Academy of Sciences estimated that Russia faced a shortfall of nearly 5 million workers in 2023, which is already impeding economic growth. The total workforce is a little under 74 million. With perhaps a million Russians, including many working-age men, having fled the country, with more than 300,000 dead or wounded in Ukraine, with more than a million men in the military, and a fertility rate of 1.5 — far below the so-called replacement rate of 2.1 — the country simply cannot meet its needs. The head of the Central Bank is among those describing it as the country’s most serious problem, hardly surprising when unemployment is just 2.9% and the vacancy rate is 6.8%. This scarcity is particularly pronounced in the manufacturing, construction, and transportation sectors. According to recruitment agencies and company management, the workforce deficit will worsen in 2024. Beyond skilled professionals, Russia struggles to meet even basic labor demands, including those for military purposes. Increasingly, schoolchildren and students are being enlisted for war-related tasks. Just last week, a major investigation revealed how minors as young as 14 are involved in activities for the “Mayor’s Labor Unit” in Krasnoyarsk, weaving camouflage nets and preparing parcels for frontline needs.

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Russia's labor productivity problem

See also: Russia's labor productivity

On February 7, 2024, Reuters reported:

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According to Rosstat, Russia's labour productivity index, one of Putin's key national development goals, fell 3.6% year-on-year in 2022, its steepest annual fall since the aftermath of the global financial crisis in 2009. Labour Minister Anton Kotyakov has said Russia needs to increase labour productivity in order to become more technologically self-sufficient. Labour productivity data for 2023 will not be published until late-2024, but the authorities' warnings about manpower shortages suggest there was no rebound in that figure last year.

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The RBC Group, a Russian media group headquartered in Moscow, reported on December 4, 2023 in their article Experts estimate the level of Russian GDP losses due to personnel shortages:

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According to experts, in order to eliminate the deficit, it will be necessary to achieve labor productivity growth of at least 2.4% per year - this is twice as fast as the historical level (the average rate over the last ten years is 1.2%) and higher than the forecast (for 2023-2026 it does not exceed 2%). Over the period since 2018, the maximum increase in productivity was observed in 2021 (3.7%), last year it fell by 3.6%. “The growing need for qualified personnel is most noticeable in the regions, especially if you pay attention to the increase in the proposed salary. It is worth noting that in the regions the proposed salary for qualified personnel is growing faster than in Moscow,” noted Vladimir Dzhuma, director of the Center for Digital Transformation and Data Analysis of the All-Russian Research Institute of Labor.

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Russia's Labour Productivity Growth from March 1996 to September 2023 (Source: CEICADATA.com)

Russia's business environment

The Kennan Institute indicates concerning Russia:

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Albats suggested that democracy should be viewed as a commodity that needs to have buyers. In order for democracy to develop in Russia, there must be a class of "consumers of democratic politics," consisting primarily of people involved in small and medium businesses. Unfortunately, Albats warned, this constituency is in decline in Russia. The number of people employed in small and medium business has declined from a peak of 8.9 million in 1995 to only 6.3 million in 2001. At the same time, the proportion of bureaucrats relative to the population has been increasing: In the last days of the Soviet Union, there was one bureaucrat for every 75.6 citizens, and in Russia today there is one bureaucrat for every 49.6 citizens. Thriving in a system rife with corruption and little accountability, Soviet-trained bureaucrats have stifled the growth of small businesses in Russia, according to Albats. She noted that the majority of regulations existing in Russia today were issued not by the Duma or the President, but by various state agencies—between 1991 and 2001, Russian federal ministries imposed 1474 regulations on business, compared with 156 passed by the legislature. Albats contended that bureaucrats find it easier to control several large businesses than many small businesses, and have set up a regulatory framework to reflect that preference.

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