The report states that by 2025 Russia will experience a “brain drain”.

Western sanctions can cause deep economic damage to the Russian Federation. In key sectors, there is a sharp drop in production, and qualified personnel began to leave the country.

Bloomberg writes about it .

Russia could face a longer and deeper recession as the impact of U.S. and European sanctions spreads, jeopardizing industries that the country has relied on for years for its economy, according to an internal report prepared for the government.VIDEO OF THE DAYplay video

Two of the three scenarios presented in the report show that the recession will accelerate next year, and the economy will return to pre-war levels only at the end of the decade or later. The “business as usual” scenario assumes that next year the economy will fall 8.3% below the level of 2021, while the “stress” scenario sets a minimum in 2024 at 11.9% below the level of last year.

All scenarios assume increased sanctions pressure. Europe’s drastic withdrawal from Russian oil and gas could also hurt the Kremlin’s ability to feed its own market, the report says.

In addition to the restrictions themselves, which cover about a quarter of imports and exports, the report details how Russia is now facing a “blockade” that “affects virtually all modes of transport.” The report estimates that up to 200,000 IT professionals could leave the country by 2025.

The document says the economy needs to be supported, but the moves include investment stimulus measures that the government has been touting over the past decade, when growth has largely stalled even without sanctions.

“With limited access to Western technology, a wave of alienation of foreign corporations and demographic headwinds, the country’s potential growth should fall to 0.5-1.0% in the next decade. After that, it will decline even more and by 2050 will be slightly above zero. Russia will also become increasingly vulnerable to falling global commodity prices as international reserves no longer serve as a buffer,” said Russian economist Alexander Isakov.

Over the next year or two, the report warns of “lower output in a number of export-oriented sectors,” from oil and gas to metals, chemicals and wood products. Although some rebound is possible later, “these sectors will cease to be drivers of the economy.”

A total shutdown of gas supplies to Europe, Russia’s main export market, could cost 400 billion rubles, or $6.6 billion a year, in lost tax revenue, according to the report. It will not be possible to fully compensate for the lost sales by new export markets even in the medium term.

As a result, production will have to be cut, jeopardizing the Kremlin’s goal of expanding domestic gas supplies. The lack of technology needed for liquefied natural gas plants is “critical” and could hamper efforts to build new ones.

Europe’s plans to stop imports of Russian oil products – accounting for about 55% of exports last year – could lead to a sharp reduction in production, leaving the domestic market also without fuel.

The report says metal producers are losing $5.7 billion a year due to restrictions.

The report warns that if the global economy slides into recession, Russia could face a further reduction in exports as demand for its products disappears, which could trigger a fall in the ruble and a surge in inflation.

On the import side, “the main short-term risk is the suspension of production due to a shortage of imported raw materials and components.” In the long run, the inability to repair imported equipment could permanently limit growth.

“There are simply no alternative suppliers for some critical imports,” the statement said.

Even in the agricultural sector, where the Kremlin touts its efforts to replace foreign supplies, reliance on key inputs could force Russians to reduce food consumption as inventories shrink, according to the report.

Restrictions on access to Western technology could leave Russia behind by a generation or two as it has to rely on less advanced alternatives from China and Southeast Asia

The report warns that the sanctions will also force the government to reconsider a number of development goals that Putin set before the war, including those to boost population growth and life expectancy.

In addition, the further impact of sanctions will affect agriculture, as 99% of poultry production and 30% of dairy cattle production depend on imports. Seeds for staples such as sugar beet and potatoes are also mostly imported, as are fish feed and amino acids.

In terms of aviation, 95% of passenger traffic is carried on foreign-made aircraft, and lack of access to imported parts can lead to a reduction in the fleet as they go out of service. The situation in mechanical engineering is no better. Only 30% of machine tools are Russian-made, and the local industry is unable to meet the growing demand

Do not forget that due to EU restrictions, the cost of road transport has increased. There will also be problems with communications, because due to restrictions on SIM cards, by 2025 there may not be enough of them in Russia, and by the end of 2022, its telecommunications sector may lag behind the world leaders by five years.

Sanctions will also hit pharmaceuticals. It turned out that about 80% of Russian production depends on imported raw materials.

(C)UNIAN 2022