Corporations leaving Russia cost 45% of national GDP

Academics at the Yale College of Administration have discovered that revenue drawn from the (near) 1,000 companies curbing or ending operations in Russia is equal to approximately 45% of Russia’s gross domestic product (GDP). 

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

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

Yale’s finding could come as a shock to some observers, since foreign direct investment (FDI) doesn't matter that much to the Russian market. The truth is, in 2020, it solely accounted for 0.63% of the nation’s GDP, significantly lower than the global common, and this was not just a one-off. 

However, Yale’s research reveals simply how much taxable cash overseas companies were making in Russia, and just how much Russia’s home market was using their providers.

“Yes, FDI just isn't a primary driver of the Russian financial system, but it surely relates to more than simply mounted assets and capital expenditure,” says Tian. “Russians purchase extra items and services from Western firms than one would think at first glance, as our analyses are displaying, and the Russian economic system just isn't the oil-exporting monolith that outsiders generally understand it to be.”

Russian exports of oil and oil products are equal to only roughly 12% of the country’s GDP, while fuel exports are equal to approximately 3% of GDP – and are continuing to decline over time, as even the Russian government admits. Other commodity exports, mostly agricultural, account for another 8% or so of GDP. 

Imports into Russia, on the other hand, are equivalent to approximately 20% of GDP – so whereas Russia is still, on balance, a net exporter, even as it is forced to promote oil and fuel at extremely discounted costs, its share of imported goods is way from trivial, in response to Tian. 

“In short, the revenue drawn by our listing of almost 1,000 firms, equal to approximtely 45% of Russian GDP, is of significantly larger magnitude than the much-ballyhooed oil exports, that are being offered at a discount right now anyway,” he provides.