Russian Economy: Agriculture, Industry, Energy, Banking, Transport, Customs, ...

Course contents: (Back to Russia)

Introduction. Russia Economy.
Historical background.
Natural Resources
Macro- economy
Agriculture
Industry and Energy. Yukos oil Company. Gazprom
The Environmental Outlook in Russia
Banking and finance
The labor force
Transportation
Russian Customs
Statistics

Learning Unit Summary

Russia is the largest country in the world; it covers a vast amount of topographically varied territory, including much that is inaccessible by conventional modes of transportation. Russia is one of the world's richest countries in raw materials, many of which are significant inputs for an industrial economy. Russia accounts for around 20 percent of the world's production of oil and natural gas and possesses large reserves of both fuels.

The performance of the Russian economy since the 1998 crisis has been impressive. Between 1998 and 2007, Russian GDP expanded by an estimated 69 percent, real incomes of the population grew by 82 percent and poverty (headcount) rates were cut more than in half to below 14 percent. The growth has been increasingly driven by domestic demand supported by ample liquidity due to high prices on Russia's main export commodities - oil, gas and metals.

Unprecedented macroeconomic stability was achieved in the context of strong budgetary and current account surpluses. Important reforms in areas such as taxation, budgetary institutions, and the removal of administrative barriers to business facilitated the rapid development of market institutions in many areas.

Modernization and productivity growth outside the oil and gas sector have been important contributing factors to the recent expansion, although major strengthening of oil, gas, and other prices on Russia's commodity exports also gave a new boost to economic growth since 2003.

Russia's GDP, estimated at $1,250 billion at 2007 exchange rates, increased by 8.1% in 2007 compared to 2006. Continued average inflation of approximately 10% and strict government budget led to the growth, while lower oil prices and ruble appreciation slowed it. As of November 2007, unemployment in Russia was at 5.9%, down from 10.4% in 2000. Combined unemployment and underemployment may exceed those figures. Industrial output in 2007 grew by 6.3% compared to 2006, driven by investment growth and private consumption demand.

The transportation system during the Soviet period was organized in the form of vertically integrated monopolies controlled by the central government. Thus, for example, the same administrative agency owned and operated the airports, airlines, and enterprises that manufactured aircraft.

Privatization in Russia has prompted profound changes in the socioeconomic life of the country, including fundamental shifts in society, capital, and political power. The outcomes of privatization efforts will in many respects determine socioeconomic and political conditions in Russia not only during the contemporary transitional period but also far into the future.

Economists have predicted several worst-case scenarios for Russia. A drop in oil prices coupled with a strengthening ruble could lead to a banking crisis as the flow of currencies reverses. In other variant, Russia could catch "Dutch disease:" high export prices strengthen the currency, encouraging imports and collapsing local industry.

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