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Putin’s war looks set to end 15 years of Russian growth

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(Bloomberg) — Russia appears poised to end 15 years of economic development by the end of 2023 with the invasion of Ukraine, subsequent sanctions and the withdrawal of foreign companies and investors. That’s according to the Washington Institute of International Finance.

The Russian economy is likely to contract 15% in 2022 alone and another 3% in 2023, returning gross domestic product to where it was fifteen years ago, economists Benjamin Hilgenstock and Elina Ribakova write in a preliminary assessment. More sanctions could worsen the situation.

“The sharp drop in domestic demand is likely to play a key role, while the drop in imports is likely to offset the decline in exports,” the economists write. “If more sanctions are imposed in the form of trade embargoes, exports could fall more than we currently forecast.”

Even after the immediate shock, the Russian economy will suffer for years from what is known as “brain drain”: the brain drain of educated middle-class Russians who have the financial means to leave the country. US and EU technology export controls will hinder technological development in Russia for years to come, according to the IIF.

At the same time, “self-sanction” by foreign companies that no longer want to do business with Russia will weaken key sectors of the Russian economy, according to the report.

“Perhaps even more important are these negative medium- and long-term implications for economic prospects,” the IIF economists write.

Title of the article in the original:

Putin’s war could end 15 years of Russian economic growth

(Repeat from Thursday).

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