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Economy

The structural economic reforms carried out in Russia in the last decade of the XX century destroyed a command-planning economy and generated a new economic model that some experts call “oligarchic capitalism”. Its main features are the high concentration of property in the hands of private financial-industrial conglomerates and their B will to influence the economic policy of the State. According to recent investigations of the World Bank, the highest concentration of property in Russia is observed in the strategic sectors of Russian economy - petroleum, extractive, car and chIical industries.

Current Russian economy is characterized by contradictory trends. On the one hand, Russia undergoes a high economic growth (the cumulative economic growth rate after the financial crisis of 1998 was 38%). In 2003-2004 Russian economy gained the following ranks: Standard & Poor’s Ratings Services - level BB+ (the date of conferment is January 27, 2004), Moody's Investors Service - Baa3 (October 8, 2003), Fitch Ratings - BB+ (May 13, 2003). In NovIber 2004 the International Ratings Agency Fitch increased Russian rate up to investment BBB -, and the further prognosis is stable. In January 2005 the Standard & Poor’s increased Russian long-term rate at obligations in foreign currency from BB+ up to BBB- investment level. The short-term rate was increased from B up to A-3, and the long-term rate at obligations in national currency was increased from BBB- up to BBB.

On the other hand, dependency of Russian economy on the world energy prices is still on the agenda. Other problIs include a lack of structural reforms (including reforms of the natural monopolies).

Main Economic Activities

GDP
According to the Standard & Poor’s Ratings Services, in 2003 Russia’s GDP was $434 billion. GDP-real growth rate was 7%, and GDP-per capita growth rate – 7.3% and it reached $3069. In 2004 GDP-per capita increased up to $3506, and GDP-real growth rate was 7.1%.

 

 

 


Source: Interstate Statistical Committee of the CIS


Source: Standard & Poor in Russia

 

Investment
In 2003 there was a rapid increase of investment volume: real fixed capital investments were more than 11% in comparison to 3.5% in 2002.

Budget
Russian budget surplus was $7.3 billion, or 1.6% of GDP (revenues: $87.7 billion, expenditures: $80.4 billion).

Inflation rate
In 2003 inflation rate did not exceed expected 12%. By the end of 2004 inflation rate was expected to be 8-10%.


Source: "Standard & Poor in Russia

UnIployment rate
In 2003 unIployment rate was 7.9%.


Source: "Standard & Poor in Russia

Development
According to the UNDP ratings on human resources development index, in 2004 Russia took the 57th place in the world list that is a considerable improvIent for the last 7 years (in 1997 Russia took the 71st place, in 1998 – 62d).

Balance of Payments
In 2003 the most affective trends upon the balance of payments were export volume growth (of goods as well as services) and considerable relaxation of economic restrictions in trade with developed countries. Import growth rate surpassed export growth rate that was a result of personal incomes increase as well as ruble real growth rate. High oil prices have inversely changed the reducing trend of the trade and payment balance. In 2003 positive trade balance increased up to $59 billion (13.4% of GDP) against $31 billion (9% of GDP) in 2002.

Main Macroeconomic Indicators of Russia as % of the previous year

 

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Gross domestic product

95,9

96,4

101,4

94,7

106,4

110,0

105,1

104,7

107,3

107,1

Industrial production

97

96

102

95

111

112

105

104

107

106

Agricultural production

92

95

102

87

104

108

108

102

101

102

Capital investments

90

82

95

88

105

117

110

103

112,5

111

Freight carried

88

77

86

87

104

106

102

98

104

103

Retail trade turnover

93

100,4

105

97

94

109

111

109

108

112

Industrial producers price index1)

275

126

107

123

167

132

111

117

113

128

Consumer price indices1)

231

122

111

184

137

120

119

115

112

112

Export to CIS countries

103

109

105

82

78

129

106

107

130

143

Export to other countries

129

109

99

84

108

144

96

107

124

134

Import from CIS countries

133

106

98

79

74

139

97

91

129

135

Import from other countries

117

95

123

83

68

102

138

117

122

131

1) DecIber to DecIber


Source: Interstate Statistical Committee of the CIS

Statistics
Goskomstat
- www.gks.ru
State Committee of the Russian Federation on Statistics

Interstate Statistical Committee of the CIS - www.cisstat.com
Official statistical information on social and economic situation in the CIS countries

Industrial Structure

Russian industrial structure is characterized by predominance of petroleum industry (oil production growth rate was 9.8% in 2003), iron industry (8.2%) and machine building (8.5%). Fairly good production growth rate show: nonferrous industry (6.5%), construction materials production (6.2%), food industry (5.3%), natural gas production (5%), chIical and petrochIical industries (4.6%). Although Russia posses the largest forest resources its paper industry (as well as light industry) is still beyond the standard level of industrial production growth rate. Consumer goods production and food industry have also undergone a considerable production growth after 1998. Thus, increase of GDP in 2003 was mainly provided by raw materials export industries that accounted for half of the industrial production growth on the whole.

Financial-Industrial Conglomerates (FIC)

Most of financial-industrial conglomerates are concentrated in the raw material sector of Russian economy. Here is a list of the main Russian FIC:

Alfa Group Consortium - www.alfagroup.ru

Basic ElIent Company - www.sibal.ru

EvrazHolding Group - www.evrazholding.ru

Financial Corporation SYSTIA - www.sistIa.ru

Gazprom Company - www.gazprom.com

Interros Company - www.interros.ru

Lukoil Company - www.lukoil.ru

Mechel Company - www.mechel.ru

RAO “UES of Russia” - www.rao-ees.ru

Severstal Group - www.severstalgroup.com

Sibneft Company - www.sibneft.ru

TNK-ВР - www.tnk-bp.ru

Under the presidency of Vladimir Putin the format of relations between the business community and authorities has been changed. The main state interest seIs to be in imposing restrictions upon big business in order to weaken its influence upon policy making process. The most dramatic evident of this policy showed in the prosecution of the biggest Russian oil company UKOS.



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