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The Economy of Russia

Russian Economy

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Economy - overview: Russia ended 2008 with GDP growth of 6.0%, following 10 straight years of growth averaging 7% annually since the financial crisis of 1998. Over the last six years, fixed capital investment growth and personal income growth have averaged above 10%, but both grew at slower rates in 2008. Growth in 2008 was driven largely by non-tradable services and domestic manufacturing, rather than exports. During the past decade, poverty and unemployment declined steadily and the middle class continued to expand. Russia also improved its international financial position, running balance of payments surpluses since 2000. Foreign exchange reserves grew from $12 billion in 1999 to almost $600 billion by end July 2008, which include $200 billion in two sovereign wealth funds: a reserve fund to support budgetary expenditures in case of a fall in the price of oil and a national welfare fund to help fund pensions and infrastructure development. Total foreign debt is approximately one-third of GDP. The state component of foreign debt has declined, but commercial short-term debt to foreigners has risen strongly. These positive trends began to reverse in the second half of 2008. Investor concerns over the Russia-Georgia conflict, corporate governance issues, and the global credit crunch in September caused the Russian stock market to fall by roughly 70%, primarily due to margin calls that were difficult for many Russian companies to meet. The global crisis also affected Russia's banking system, which faced liquidity problems. Moscow responded quickly in early October 2008, initiating a rescue plan of over $200 billion that was designed to increase liquidity in the financial sector, to help firms refinance foreign debt, and to support the stock market. The government also unveiled a $20 billion tax cut plan and other safety nets for society and industry. Meanwhile, a 70% drop in the price of oil since mid-July further exacerbated imbalances in external accounts and the federal budget. In mid-November, mini-devaluations of the currency by the Central Bank caused increased capital flight and froze domestic credit markets, resulting in growing unemployment, wage arrears, and a severe drop in production. Foreign exchange reserves dropped to around $435 billion by end 2008, as the Central Bank defended an overvalued ruble. In the first year of his term, President MEDVEDEV outlined a number of economic priorities for Russia including improving infrastructure, innovation, investment, and institutions; reducing the state's role in the economy; reforming the tax system and banking sector; developing one of the biggest financial centers in the world, combating corruption, and improving the judiciary. The Russian government needs to diversify the economy further, as energy and other raw materials still dominate Russian export earnings and federal budget receipts. Russia's infrastructure requires large investments and must be replaced or modernized if the country is to achieve broad-based economic growth. Corruption, lack of trust in institutions, and more recently, exchange rate uncertainty and the global economic crisis continue to dampen domestic and foreign investor sentiment. Russia has made some progress in building the rule of law, the bedrock of a modern market economy, but much work remains on judicial reform. Moscow continues to seek accession to the WTO and has made some progress, but its timeline for entry into the organization continues to slip, and the negotiating atmosphere has soured in the wake of the Georgia and global economic crises.

GDP:

GDP - real growth rate: 6% (2008 est.) 8.1% (2007 est.) 7.7% (2006 est.)

GDP - per capita:

GDP - composition by sector: agriculture: 4.1% industry: 41.1% services: 54.8% (2007 est.)

Population below poverty line:

Household income or consumption by percentage share: lowest 10%: 1.9% highest 10%: 30.4% (September 2007)

Distribution of family income - Gini index: 41.5 (September 2008)

Inflation rate (consumer prices):

Labor force: 75.7 million (2008 est.)

Labor force - by occupation: agriculture: 10.2% industry: 27.4% services: 62.4% (2007 est.)

Unemployment rate: 6.2% (2008 est.)

Budget: revenues: $383.5 billion expenditures: $273.5 billion (2008 est.)

Industries: complete range of mining and extractive industries producing coal, oil, gas, chemicals, and metals; all forms of machine building from rolling mills to high-performance aircraft and space vehicles; defense industries including radar, missile production, and advanced electronic components, shipbuilding; road and rail transportation equipment; communications equipment; agricultural machinery, tractors, and construction equipment; electric power generating and transmitting equipment; medical and scientific instruments; consumer durables, textiles, foodstuffs, handicrafts

Industrial production growth rate: 1.9% (2008 est.)

Electricity - production: 1.016 trillion kWh (2007 est.)

Electricity - production by source:

Electricity - consumption: 1.003 trillion kWh (2006 est.)

Electricity - exports: 18.6 billion kWh (2007 est.)

Electricity - imports: 6 billion kWh (2007 est.)

Oil - production: 9.98 million bbl/day (2007 est.)

Oil - consumption: 2.699 million bbl/day (2007 est.)

Oil - exports: 5.17 million bbl/day (2007)

Oil - imports: 54,000 bbl/day (2005)

Oil - proved reserves: 79 billion bbl (1 January 2008 est.)

Natural gas - production: 654 billion cu m (2007 est.)

Natural gas - consumption: 481 billion cu m (2007 est.)

Natural gas - exports: 173 billion cu m (2007 est.)

Natural gas - imports: 68.2 billion cu m (2007 est.)

Natural gas - proved reserves: 44.65 trillion cu m (1 January 2008 est.)

Agriculture - products: grain, sugar beets, sunflower seed, vegetables, fruits; beef, milk

Exports: $476 billion (2008 est.)

Exports - commodities: petroleum and petroleum products, natural gas, wood and wood products, metals, chemicals, and a wide variety of civilian and military manufactures

Exports - partners: Netherlands 12.2%, Italy 7.8%, Germany 7.5%, Turkey 5.2%, Belarus 5%, Ukraine 4.7%, China 4.5% (2007)

Imports: $302 billion f.o.b. (2008 est.)

Imports - commodities: vehicles, machinery and equipment, plastics, medicines, iron and steel, consumer goods, meat, fruits and nuts, semifinished metal products

Imports - partners: Germany 13.3%, China 12.2%, Ukraine 6.7%, Japan 6.4%, US 4.8%, Belarus 4.4%, South Korea 4.4%, Italy 4.3% (2007)

Debt - external: $527.1 billion (June 2008 est.)

Economic aid - recipient:

Currency:

Currency code:

Exchange rates: Russian rubles (RUB) per US dollar - 24.3 (2008 est.), 25.659 (2007), 27.19 (2006), 28.284 (2005), 28.814 (2004)

Fiscal year: