Firms leaving Russia cost 45% of national GDP

Lecturers on the Yale College of Management have discovered that revenue drawn from the (near) 1,000 companies curtailing or ending operations in Russia is equivalent to roughly 45% of Russia’s gross home product (GDP). 

“This is an approximation, so notice that some companies, akin to Pepsi, are continuing some sales in Russia but have pulled again on others, so it's impossible to say that every greenback from that 45% is now misplaced,” explains Steven Tian, analysis director at the Yale Chief Government Leadership Institute. “Nonetheless, the sum is staggering and really emphasises the magnitude of this business withdrawal.”

Tian is part of the Yale team that has produced the definitive, go-to listing of firms withdrawing or staying in Russia, which remains to be being updated at time of writing. 

Yale’s finding could come as a shock to some observers, since overseas direct investment (FDI) does not matter that much to the Russian market. The truth is, in 2020, it only accounted for 0.63% of the country’s GDP, considerably lower than the global average, and this was not only a one-off. 

Nonetheless, Yale’s analysis exhibits just how much taxable cash international corporations had been making in Russia, and simply how a lot Russia’s domestic market was using their services.

“Yes, FDI will not be a main driver of the Russian economy, but it relates to more than simply fixed assets and capital expenditure,” says Tian. “Russians purchase more goods and services from Western firms than one would assume at first look, as our analyses are showing, and the Russian economy is just not the oil-exporting monolith that outsiders generally perceive it to be.”

Russian exports of oil and oil merchandise are equal to only roughly 12% of the nation’s GDP, while fuel exports are equal to approximately 3% of GDP – and are continuing to say no over time, as even the Russian government admits. Other commodity exports, largely agricultural, account for one more 8% or so of GDP. 

Imports into Russia, then again, are equivalent to roughly 20% of GDP – so whereas Russia continues to be, on stability, a web exporter, at the same time as it is pressured to promote oil and gas at highly discounted costs, its share of imported items is far from trivial, in response to Tian. 

“In short, the revenue drawn by our list of almost 1,000 companies, equal to approximtely 45% of Russian GDP, is of considerably greater magnitude than the much-ballyhooed oil exports, that are being sold at a reduction proper now anyway,” he adds.