Ian Bremmer, president of Eurasia Group, told CNBC on Monday that while short-term disruptions from sanctions are less than originally anticipated, the real debate goes beyond 2022.
“Anecdotal evidence suggests the manufacturing dislocations are rising as inventories are depleted and scarcity of foreign parts becomes binding. Chips and transport are among the sectors cited, in some cases reflecting dual-use military demand,” Bremmer said.
“Governmental arrears may be contributing to broader shortages. Imports of consumer goods are increasing, but less so intermediate/investment goods.”
Bremmer highlighted that as sanctions intensify and popular discontent grows, the educated are leaving Russia, underscoring the importance of trade sanctions on sensitive technologies and the “longer timeline by which sanctions undermine trend productivity and growth.”
“Brain drain leads to a direct decline in the working age population, especially high-productivity workers, reducing GDP,” he said.
“It affects overall productivity, reducing innovation and affects overall confidence in the economy, reducing investment and savings.”
Eurasia Group projects a sustained, long-term decline in economic activity to eventually result in a 30%-50% contraction in Russian GDP from its prewar level.
‘Catastrophically crippling’
A Yale University study published last month, which analyzed high-frequency consumer, trade and shipping data that its authors say shows a truer picture than the Kremlin is presenting, argued that rumors of Russia’s economic survival had been greatly exaggerated.
The paper suggested international sanctions and an exodus of more than 1,000 global companies are “catastrophically crippling” the Russian economy.
“Russia’s strategic positioning as a commodities exporter has irrevocably deteriorated, as it now deals from a position of weakness with the loss of its erstwhile main markets, and faces steep challenges executing a ‘pivot to Asia’ with non-fungible exports such as piped gas,” the Yale economists said.
Article source: https://www.cnbc.com/2022/08/02/russia-faces-economic-oblivion-despite-short-term-resilience.html