Labour shortages will dampen economic growth in Russia

Significance Although Russia's economy continued to expand briskly in the first quarter, future growth will be at risk if current imbalances in the labour market are not addressed. Labour policies are being adjusted to deal with the consequences of the strong external and internal shocks of the last four years, including the pandemic, war, sanctions and a growing preference for self-employment. Impacts Rising wages will stoke inflation and make it more difficult for the CBR to reduce interest rates. Corporate profitability in labour-intensive sectors will be reduced by rising costs. Investment will need to grow rapidly over a sustained period if firms are to substitute capital for increasingly scarce labour. Russia will face growing competition from China and South Korea to attract workers from Central Asia.