Oleg Buklemishev on the impact of hostilities on the economy of border regions

The director of the Center for Economic Policy Research at the Faculty of Economics of Moscow State University spoke to Kommersant about the impact of hostilities on the economy of the Russian border regions and the prospects for restoring business activity there. Oleg Buklemishev.

– What impact can the proximity of hostilities and related incidents have on the economy of the Kursk, Belgorod, Voronezh and Bryansk regions? Should we expect a decline in gross regional product (GRP)?

— Obviously, there is no place to expect economic growth in these regions, although it is very difficult to make numerical estimates now. Statistical data on the GRP of the regions appear with more than a year delay. In addition, there are questions both to the objectivity of this indicator, which divides the single production process between regions, and to the statistics itself.

Consumer activity near the war zone cannot but differ from normal. In such conditions, consumers first of all think about how to survive until tomorrow. Any large expenditure, such as buying an apartment, becomes pointless under fire, unless it is a car that is purchased to leave.

I do not rule out that in such a situation, individual enterprises can receive positive results, but this does not lead to the economic growth of the region as a whole.

The outflow of the working-age population, the relocation of companies and, as a result, the general shift of economic activity away from the border is already observed. This effect, apparently, has not yet been fully realized, and its significance remains to be assessed. People are fleeing, entrepreneurs are migrating. Those who stay often simply have no alternative.

– In which of these regions will the negative effects be more pronounced and which industries may be most affected?

— It is impossible to give exact estimates now. But it is important to emphasize that the negative consequences will not be limited to the listed border regions, but the problems cover a much wider area.

Not yesterday or even the day before yesterday, restrictions were imposed on flights to 11 cities, and this complicates logistics, as a result, trade and production. You can look at the low occupancy rate of hotels and restaurants in Crimea, where the economy is heavily dependent on tourists. Today, flights to the peninsula are impossible, and the beaches are turning into a defensive zone.

— Is it possible to rely on some similar experience when assessing the negative effect of hostilities on the economy of individual regions?

– No, each such case is too specific. The last major military conflict in the densely populated zone of Europe was in the former Yugoslavia, but even there there was no fighting along the front of a thousand kilometers.

– How long can the negative effect be and from what moment should we expect recovery?

– In any economic activity, it is important to understand that tomorrow the situation will be stable and you will be able to continue working. Therefore, a simple cessation of hostilities when a balance point is reached that does not suit either side will not be enough to restore economic activity. We need confidence in the future, guarantees that hostilities will not resume again.

How can such confidence be instilled?

– I’m afraid this is not a question for me, but for military-political analysts. Sustainable peace requires guarantees. Most often, this is a crushing defeat of one of the conflicting parties, recognized as legitimate by all participants in the process and does not imply an early resumption of previous claims.

Interviewed by Anatoly Kostyrev