Russia Economy Profile 2008

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 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. President 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)

$2.076 trillion (2007 est.)

GDP (official exchange rate)

$1.286 trillion (2007 est.)

GDP - real growth rate

8.1% (2007 est.)

GDP - per capita (PPP)

$14,600 (2007 est.)

GDP - composition by sector

agriculture: 4.6%
industry: 39.1%
services: 56.3% (2007 est.)

Population below poverty line

15.8% (November 2007)

Household income or consumption by percentage share

lowest 10%: 1.9%
highest 10%: 30.4% (September 2007)

Inflation rate (consumer prices)

11.9% annual average
note: 12% at year-end (2007 est.)

Investment (gross fixed)

19.4% of GDP (January - September 2007 est.)

Labor force

75.1 million (November 2007 est.)

Labor force - by occupation

agriculture: 10.8%
industry: 28.8%
services: 60.5% (November 2007 est.)

Unemployment rate

5.9% (November 2007 est.)

Distribution of family income - Gini index

41.3 (September 2007)

Budget

revenues: $299 billion
expenditures: $262 billion (2007 est.)

Public debt

7% of GDP (2007 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

6% (2007 est.)

Electricity - production

1 trillion kWh (2007 est.)

Electricity - consumption

985.2 billion kWh (2007 est.)

Electricity - exports

18 billion kWh (2007)

Electricity - imports

2.9 billion kWh (2007 est.)

Oil - production

9.87 million bbl/day (2007)

Oil - consumption

2.916 million bbl/day (2006)

Oil - imports

100,000 bbl/day (2005)

Oil - exports

5.08 million bbl/day (2007)

Oil - proved reserves

60 billion bbl (1 January 2006 est.)

Natural gas - production

656.2 billion cu m (2007 est.)

Natural gas - consumption

610 billion cu m (2007 est.)

Natural gas - exports

182 billion cu m (2007 est.)

Natural gas - imports

37.5 billion cu m (2005)

Natural gas - proved reserves

47.57 trillion cu m (1 January 2006)

Current Account Balance

$74 billion (2007 est.)

Agriculture - products

grain, sugar beets, sunflower seed, vegetables, fruits; beef, milk

Exports

$365 billion (2007 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 12.3%, Italy 8.6%, Germany 8.4%, China 5.4%, Ukraine 5.1%, Turkey 4.9%, Switzerland 4.1% (2006)

Imports

$260.4 billion (2007 est.)

Imports - commodities

machinery and equipment, consumer goods, medicines, meat, sugar, semifinished metal products

Imports - partners

Germany 13.9%, China 9.7%, Ukraine 7%, Japan 5.9%, South Korea 5.1%, US 4.8%, France 4.4%, Italy 4.3% (2006)

Reserves of foreign exchange and gold

$470 billion (31 December 2007 est.)

Debt - external

$384.8 billion (30 June 2007)

Stock of direct foreign investment - at home

$271.6 billion (2006)

Stock of direct foreign investment - abroad

$209.6 billion (2006)

Market value of publicly traded shares

$1.322 trillion (2006)

Economic aid - recipient

$982.7 million in FY06 from US, including $847 million in non-proliferation subsidies

Currency (code)

Russian ruble (RUB)

Exchange rates

Russian rubles per US dollar - 25.659 (2007), 27.19 (2006), 28.284 (2005), 28.814 (2004), 30.692 (2003)

Fiscal year

calendar year