Inside Russian Economy


Characteristics of Russian economy Russia is the wealthiest country in
the world in terms of resources. It has the highest volumes
of forests, water lakes, 40% of world palladium and 10% of
world oil and gas reserves. It is a mixed economy with state
acquiring major sectors of the economy. Market reforms of 1999
privatized much of the Russian agriculture
and industry sector. It was surprising that
privatization also occurred in the energy and
defense rated fields. With currency rubble Russia
stands at 12th position in terms of GDP which is
about $1.350 trillion. She place herself at 6th position
when it comes to comparing its PPP (Purchasing Power Parity)
i.e., 3.938 trillion dollars. The Russian is rising every year with
an average GDP growth rate of 1.7%. The sectors that accounts for
the whole of the GDP of Russia are agriculture (4.7%), industry
(33.1%) and services (66.2%). In Russia 13.4% of total population
is living below poverty line The labor force of Russia
stands at 76.9 million. The unemployment rate in Russia is 5.4% If you ask the per capita monthly income of
a Russian than i.e., 565$ or 32,746 RUB. Main industries operating in Russia are
petroleum,  natural gas, coal, chemical, metals, rolling mills, aircraft, space
vehicles and defense equipments. Recently Russia was placed at 40th position
in terms of ease of doing business. Russia carry out export
of $285.5 billion which mainly includes petroleum
and petrol products, natural gas, metals,
wood and wood products, chemicals,  defense and
civilian manufacturers. Main exporting partners of
Russia are Netherlands, China, Germany, Italy, Turkey,
Belarus and Japan. Russian do imports with
counties like China, Germany, United States,
Belarus and Italy. Its total import expenditure
is $182.3 billion. The main goods that are imported includes
machinery, vehicles, pharmaceutical products, meat, fruits and nuts, optical
and medical instruments, iron and steel. Russian has been successful in collecting
FDI worth $361 billion dollars Strongholds of Russian economy It is the largest country in the world
therefore it is believed that 30% of world’s natural resources exists
in Russia because of its vast size. Various geographical regions in Russia
contributes unevenly to Russian economy, with Moscow taking pride
in being the highest contributor. An estimate of World Bank
says the total worth of Russia’s natural resources
is 75 trillion US$. A 2012 report says 16% of the total GDP
was accounted by the oil and gas sector. This sector was held
responsible for 52% of federal budget revenues and over
70% of total exports. Thereby, making Russia the
largest exporter of natural gas and second largest
exporter of petroleum. This clear indicates that Russian
economy is quite dependent on its petroleum reserves and make
energy super power of the world. After petroleum and natural
gas it is defense which is another supporting
pillar of Russian economy. Russia has indigenously manufactures 5th
generation fighter jets, nuclear powered submarine, advanced firearms, short range
and long range ballistic missiles. This is what it export to war
torn countries like India which is surrounded by threats
of China and Pakistan. Russia advancement in field
of military has made her second largest exporter of
defense equipments after USA. Defense manufacturing
contributes $15.7 billion to the revenue generated
by the export Period of 2000-2012 The period between 2000 and
2012 saw rapid growth in living standard of Russians with
disposable income rising by 160%. This happened due to heavy
export of petroleum products as the prices of oil barrels
raised by five folds. This period also witnessed
significant rise in self assessed life
satisfaction of Russians. Along with these
raises, poverty and unemployment also increased
by more than half. This growth however was unequally
distributed as it was found that 110 wealthiest Russians actually hold
the 35% of all financial assets. Therefore, Moscow the official
capital of Russian has been considered capital of billionaires
by Forbes every year since 2008. Russia also lost 880
billion dollars due to the outflow of illicit money
during this period. The pump that Russian economy
got was because of the pro-growth economic reforms
that took place in Russia along with tax reforms like
imposing income tax upto 13% and huge effort were done at
deregulation in between 2000-2002. Industries saw a rise of 75%,
investments increased by 125% and people under middle class raised
from 8 million to 55 million. Period of Recession As the prices of oil prices
reduced during the early 2014 and due to higher dependency of
Russian economy on oil and gas she faced the recession and GDP
which was growing 0.6% in 2014, contracted to 3.7% and further
in 2015 and 2016 respectively. As of now, Russian economy had managed
to maintain a positive growth of 0.3% in 2016 so it is official
not under the threat of recession. According to a report
released in May 2016, monthly wages feel to 450
dollars per month also population living under
poverty line raised from 16.1 million in 2015 to
19.2 million in 2016. Digging Past for Further Analysis During the period of
1970, when Russia was Soviet Union, she faced
the era of stagnation. Then in 1986, Mikhail Gorbachev did efforts
to stabilize the economy by converting soviet economy to market oriented socialist
economy but his unfortunately failed. Perestroika however tried to
disintegrate the economy and politics which led to the breaking
up of Soviet Union in 1991. Period of 1991-1998 After the collapse of Soviet Union,
Russian economy transformed from centrally planned economy to
globally integrated market economy. The process of privatization was
not at all planned but haphazard and corrupt due to which major state
owned firms went to oligarchs who had political
connections leaving wealth being concentrated to
a portion of society. Afterwards Yelstin’s ‘shock
therapy’ of radical and market oriented reforms was applied
to save Russia from downfall on the recommendation of IMF
and top American economist but it came out to be a
disaster and GDP fall by 40%. Situation worsened to hyperinflation
which in turn wiped out the personal savings of Russians leading to the
increase in crime rate and poverty. 1998 was the year of
financial crisis for Russia as government
failed to collect revenues and dependency on short
term borrowing from finance budget deficit
led to this calamity. Then in 1990, Russia turned towards IMF
for financial help and became the largest borrower with loans amounting to $20 billion
for which IMF was later criticized. Period of 1999-2008 This duration is considered the time period
of recovery and growth of Russian Economy. Russia devaluated her currency
Rubble which helped domestic producers to compete nationally
and also on global platform. The period of 2000-2002
changed the circumstances for small and medium
sized enterprises as pro-growth economic reforms took place
along with comprehensive tax reforms. During the time period of 2000-2008,
Russian economy got a push due to rise in price of commodities and GDP
rose to 7% on an average per year. Poverty declined from 30% to
14% and disposable income was more than doubled and in
dollars increased eight folds. Moreover, consumer credit
between 2000 and 2006 raised 45 times also boosting
private consumption. In 2007, Russian economy got applauds
from World Bank which stated that Russian economy has achieved
unprecedented macroeconomics stability. Russian economy was successful
in maintaining impressive fiscal discipline with budget surplus every
year from 2000 to October 2007 Period of 2009-2014 Impact of global credit crunch was
also seen on Russian banks in 2008. Fortunately there was no long term damage
due to proactive and timely response of the government and central bank which saved
banking system from global financial crisis. This brief period of
recession was followed by recovery period which
started in late 2009. WTO accepted the membership of Russian in
2011 after a long 16 years of negotiation. After this Russia finally
succeeded in getting a label of high income
economy by World Bank. Due to the unpredictable
rise and fall in the prices of oil and gas,
Russian leaders started to ponder on diversifying
the dependence of economy on other sectors
also like technology. This shift however showed
limited growth of 1.3% in 2013 after performing
well all these years. Several reasons were stated for this
slowdown like recession in EU, stagnant oil prices, demographic issues and
lack of strong industrial sector. Russia also engaged in political turmoil
with Ukraine during this period. Period of 2014-Present Annexation of Crimea in March
2014 and conflicts with Ukraine led other powerful countries
like USA, Canada, Japan and the European Union
to impose sanctions on financial energy and
defense sector of Russia. This declined the Russian Rubble and
raised the fear of financial crisis. Russia responded to this sanction
again these countries and also imposed ban on food imports from
European Union and the United States. Growth of GDP in first half of
2014 was just 1% and grew by 0.6% in whole of 2014 contrary to 0.5%
which was predicted by ministry. Second half of 2015 saw contraction
of economy by 4.6% due to inflation as economy once
again entered recession. To balance the state budget
it was proposed to keep the oil price at US$74 as
opposed to US$104 in 2014. Earlier Russia had the forex
reserves of around $US500 million but now it has plummeted to
US$360 million in summer 2015. Therefore the plan is to keep
accumulating forex reserves till they reach the past reserve
of $US500 million again.

1 thought on “Inside Russian Economy

  1. Bullshit!! Russia is a miserable gas station wanting to be a country. Their people are hated around the world as they are most inclined to deal in criminal activities, prostitution, and drugs.
    They are suffering from a complex called Grandiosity disorder. They hate that the world is way ahead of them and the West came to help them rescue them and teach them how to use a banking system. In the 90's they didn't know how to use a bank account nor a credit card. Thanks to the USA they got into the international banking system. They just got kicked out of the G8 because they dint deserve to be one. Brazil and India have much larger economies.
    Miserable mutrherfuckers didn't appreciate what the US and Europe tried to help them, instead, they elected a corrupt midget that has committed so many atrocities.

Leave a Reply

Your email address will not be published. Required fields are marked *