Putin in trouble as war in Ukraine leaves Russian economy in tatters

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Vladimir Putin finds himself entangled in a maze of ever-mounting problems. The Russian President is currently grappling with the aftermath of the audacious rebellion staged by the enigmatic group known as Wagner.

However, that’s merely the tip of the iceberg for Putin’s problems. A new issue is emerging, casting its shadow as one of the most formidable threats to the Russian economy.

As a result of widespread conscription and a mass exodus of skilled Russians, haunted by the looming impact of the war, an alarming scarcity of labor manifests itself.

This scarcity, heralded by Goldman Sachs as the “most binding constraint on the Russian economy,” surpasses even the shackles imposed by sanctions on capital and technology.

With an overwhelming number of job vacancies surpassing the available workforce, the Russian job market constricts twice as tightly as that of the UK, where wages soar to new heights.

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Amidst this dire panorama, workers move in different directions, with some seeking solace beyond national borders, while others head to the front line. Yet many persevere in the face of adversity.

As one discerning economist aptly observes, this dearth of labor leaves companies in desperation for the younger generation to step forward and fill the void. Even the head of the country’s central bank cautions that this predicament will inevitably stoke the fires of inflation.

For Putin, who openly acknowledges Russia’s demographic challenge as one of the few elements that truly keeps him awake at night, this issue looms large.

In a characteristic display of candor, he candidly confesses that the nation’s highest-ranking officials are constantly embroiled in intense deliberations regarding the “shortage of personnel…all the time.”

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During a pivotal meeting attended by the Kremlin’s economic leaders and the formidable figure of the central bank, Elvira Nabiullina, Putin unveiled the disconcerting reality: companies, in the wake of the Ukrainian invasion, are holding onto their excess labour.

In an attempt to retain their most invaluable assets, employers implored workers to reduce their hours. Company executives retained their skilled workforce on the books, while workers salvaged a semblance of financial stability amid the initial downturn.

However, experts claim that this policy inadvertently fuelled the current crisis, transforming acute labor shortages in critical industries into a chronic malaise gripping the nation.

Putin said: “Now the situation is fundamentally different. There are simply not enough workers in many areas.”

Regrettably, many departed workers are unlikely to return. Russia’s communications ministry concedes that approximately 10 per cent of its IT workforce left their homeland in 2022, their departure an irrevocable act. Hundreds of thousands of Russia’s brightest minds and most talented individuals have followed suit.

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