Thought for the day

Why Russia Invaded Ukraine?

Adding Ukraine To Russia’s GDP could have vaulted an enlarged
Russia to fourth biggest country in the world.


 
27 April 2024
 
Russia’s economic future was supposedly golden in 2001 when the BRIC acronym was invented. But the reality has been one of exploitation by an elite, rather than increased wealth for the country as a whole. Particularly after the expulsion of Hermitage Capital Management in 2005 (then the largest foreign investor in Russia), after exposing widespread corruption, Russia's share of global GDP has fallen steadily.

Percentage Share of Global GDP: 1990-2030
Using 10-year CAGR for projections
Why Russia Invaded Ukraine?
* GDP in Purchasing Power Parity terms with added estimates for the size of the informal economy and adjustments for out-of-date GDP base year data.


In sharp contrast, the share of global GDP taken by Russia's erstwhile peers, China and India, has risen spectacularly. China and Russia together are expected to account for not far short of 25% of global GDP by 2030. Whereas Russia's contribution may be as low as 2% due to an exceptionally poor record of annual growth, some 5-6% lower than the growth seen in China and India.

An easy walk-in invasion of Ukraine could have partially reversed this decline, and created an enlarged Russian economy "at a stroke" some 14%+ greater in size. In theory, perhaps seen as an easy way of moving up to fourth biggest country in the world in purchasing power parity terms. Removing the shackles that currently impede economic growth, to provide a stable base and good Governance for entrepreneurs to flourish, has probably not been considered since the days of Hermitage's focus on probity as a way of enhancing market value in the "Wild East".

Whatever happens now, the size and growth of the Russian economy in coming years, with or without all or part of Ukraine, is likely to be much lower than would have been the case had the invasion not taken place.  See more data...



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