chief of mission: Ambassador John R. BEYRLE embassy: Bolshoy Deviatinskiy Pereulok No. 8, 121099 Moscow mailing address: PSC-77, APO AE 09721 telephone: [7] (495) 728-5000 FAX: [7] (495) 728-5090 consulate(s) general: Saint Petersburg, Vladivostok, Yekaterinburg
Flag description:
three equal horizontal bands of white (top), blue, and red
Economy
Russia
Economy - overview:
Russia ended 2007 with its ninth straight year of growth, averaging 7% annually since the financial crisis of 1998. Although high oil prices and a relatively cheap ruble initially drove this growth, since 2003 consumer demand and, more recently, investment have played a significant role. Over the last six years, fixed capital investments have averaged real gains greater than 10% per year and personal incomes have achieved real gains more than 12% per year. During this time, poverty has declined steadily and the middle class has continued to expand. Russia has also improved its international financial position since the 1998 financial crisis. The federal budget has run surpluses since 2001 and ended 2007 with a surplus of about 3% of GDP. Over the past several years, Russia has used its stabilization fund based on oil taxes to prepay all Soviet-era sovereign debt to Paris Club creditors and the IMF. Foreign debt is approximately one-third of GDP. The state component of foreign debt has declined, but commercial debt to foreigners has risen strongly. Oil export earnings have allowed Russia to increase its foreign reserves from $12 billion in 1999 to some $470 billion at yearend 2007, the third largest reserves in the world. During President PUTIN's first administration, a number of important reforms were implemented in the areas of tax, banking, labor, and land codes. These achievements have raised business and investor confidence in Russia's economic prospects, with foreign direct investment rising from $14.6 billion in 2005 to approximately $45 billion in 2007. In 2007, Russia's GDP grew 8.1%, led by non-tradable services and goods for the domestic market, as opposed to oil or mineral extraction and exports. Rising inflation returned in the second half of 2007, driven largely by unsterilized capital inflows and by rising food costs, and approached 12% by year-end. In 2006, Russia signed a bilateral market access agreement with the US as a prelude to possible WTO entry, and its companies are involved in global merger and acquisition activity in the oil and gas, metals, and telecom sectors. Despite Russia's recent success, serious problems persist. Oil, natural gas, metals, and timber account for more than 80% of exports and 30% of government revenues, leaving the country vulnerable to swings in world commodity prices. Russia's manufacturing base is dilapidated and must be replaced or modernized if the country is to achieve broad-based economic growth. The banking system, while increasing consumer lending and growing at a high rate, is still small relative to the banking sectors of Russia's emerging market peers. Political uncertainties associated with this year's power transition, corruption, and lack of trust in institutions continue to dampen domestic and foreign investor sentiment. PUTIN has granted more influence to forces within his government that desire to reassert state control over the economy. Russia has made little progress in building the rule of law, the bedrock of a modern market economy. The government has promised additional legislative amendments to make its intellectual property protection WTO-consistent, but enforcement remains problematic.
GDP (purchasing power parity):
$2.097 trillion (2007 est.)
GDP (official exchange rate):
$1.29 trillion (2007 est.)