Experts of the Gaidar Institute explained the decrease in the share of exports in the pattern of the RF economy

The share of exports in the pattern of the Russian economy in 2023 fell to 23%, a record low since the 1990s, the RBC reports, citing Rosstat’s data. Alexander Firanchuk and Dmitry Kuznetsov, experts of the International Trade Department of the Gaidar Institute explained the decline in the share of exports and its impact on domestic supply growth.

“Indeed, as seen from Rosstat’s data exports in relation to GDP have become record low in the modern history,” confirmed Dmitry Kuznetsov, researcher of the Gaidar Institute.

According to Alexander Firanchuk, the ratio of exports to GDP in Russia can be very volatile because of a high dependence on hydrocarbons. Alexander Firanchuk believes that the decrease in the share of exports in GDP to a record low is due to both normal market changes and sanctions restrictions. According to the European Union’ statement, the EU sanctions covered 61% of imports from Russia to the EU in 2021, or euro 95 bn. “External restrictions have led to the need to redirect goods to neutral markets and the loss of some exports. The redirection required discounts, which, although tending to decrease, have not completely disappeared,” Firanchuk noted.

Russian pipeline gas exports to the European Union have also declined considerably owing to various factors, including the undermining of the Nord Stream gas pipelines and reduced transit through Ukraine. As a result, the G7 countries tightened restrictions on imports of Russian diamonds, which led to the purchase of diamonds from the Alrosa company to Gokhran (State Depository of Precious Metals). Alexander Firanchuk believes that even without sanctions, an adjustment of global energy prices in 2023 would have reduced the value of Russian exports. However, additional discounts on Russian oil arose on the back of sanctions. As a result, the record low value of the share of exports in GDP can be explained by a decrease in effective export prices and export volumes of some goods.

Dmitry Kuznetsov added that exports are denominated in US dollars and GDP is calculated in rubles, that is, the ratio of exports to GDP also depends on the exchange rate. In 2023, exports decreased by nearly 30% and the ruble depreciated by 20% on average over the year (compared to the 2022 average value) and was unable to compensate for the dollar decline in exports. At the same time, the denominator (nominal GDP) increased at a somewhat accelerated rate on the back of inflation (partly due to the weakening of the ruble), so the ratio of exports to GDP decreased, the expert explained.

Experts note that the raw material pattern of Russian exports does not imply the possibility of a considerable redirection of goods to the domestic market. “It cannot be said that the volumes by which Russian exports decreased ended up to a great extent on the domestic market,” noted Dmitry Kuznetsov.

 Also, experts believe that the share of exports in GDP will remain approximately at the same level in the near future, possibly, with some upward trend. However, the increased sanctions pressure may lead to greater discounts on Russian goods and, eventually, to a decline in the share of exports in GDP. As Alexander Firanchuk noted, prediction of this indicator’s short-term momentum was quite an unpromising task because it was prone to fluctuations of nominal parameters, namely, prices for raw material and exchange rates. The long-term trend in the share of exports in GDP will be determined by the dynamics of the sanctions standoff, Alexander Firanchuk believes.