December 31, 2022

A Year of Decline

The authoritative Russian publication The Bell has offered a roundup of the costs of Russia’s War on Ukraine that shows the deep and enduring economic and social costs this horrific folly is having on the country. Here is a summary of some of their findings:

In early 2022, the Russian economy was projected to see 3% GDP growth over the coming year. But, as a result of Russia’s attack on Ukraine, it has fallen 2.8%, resulting on a nearly 6% gap between what is and what could have been.

In 2021 prices, that 6% GDP gap equals roughly R9 trillion – the cost of the Sochi olympics or 15 bridges to Sakhalin.

The middle class (30% of the population) has been hardest hit by the economic downturn, seeing their real income drop 5%, while for the Russian population as a whole the drop has been 2.2%.

As a result of Russia’s war and the ensuing sanctions exchange, Russians have been forbidden from investing in “unfriendly countries.” The inability to invest in US securities over the past year, The Bell estimates, has resulted in a 90% reduction in individuals' investment income over the coming 10 years.

An estimated 500,000 Russians have fled the country.

The immediate effect of the mobilization of 300,000 Russian men, if they serve an entire year, could lead to 25,000 missed births in 2023.

Demographers estimate that Russia’s fertility rate will decline year on year from 1.5 per female to 1.2, causing annual births to decline from 1.4 million to 1.2 million. Fertility rates should be in the range of 2.05 to 2.1 in order for a population to remain basically stable.

In order to evade state blockages of internet sites, Russians are downloading VPN software in record numbers. From March to June of last year Russia ranked second in the world for the number of VPN apps downloaded. YouTube remains unblocked, yet it is expected at any time. If that happens, the network stress of rerouting such traffic through VPN apps is expected to be severe.

Prices for airline tickets to Europe have tripled. And, given that most all European countries have banned direct flights with Russia, the logistics are more difficult, requiring travelers to fly via Istanbul, Erevan, Astana, and other capitals.

The government has stopped publishing passenger data, but Kommersant recently discovered and published data showing that international passenger travel to and from Russia was at 12.1 million passengers during the first nine months of the year – a drop of 13% versus the same period in 2021, and 72% vs. 2019 (42 million passengers), the last pre-Covid year.

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