RUSSIA


A large diverse country with vast natural resources striving to find its place in the world after the 1991 breakdown of the Soviet Union

Geographically the largest country and the seventh most populous country in the world

Total area: 17,075,200 sq km (approximately 1.8 times the size of the U.S.)
Population:  142.89 million
Government type: Federal semi-presidential constitutional republic
Administrative division: 46 provinces (called “oblast”), 21 republics (“respublika”), 4 autonomous okrugs (“avtonomnyy okrug”), 9 krays, 2 federal cities (“gorod”), and 1 autonomous oblast (“avtonomnaya oblast”)
Capital + other major cities: Moscow (11.5 million) + St. Petersburg (4.9 million), Novosibirsk (1.5 million), Yekaterinburg (1.3 million), Nizhniy Novgorod (1.25 million) , Samara (1.2 million), Omsk (1.2 million), Kazan (1.1 million), Chelyabinsk (1.1 million) , Rostov-na-Donu (1.1 million), Ufa (1.1 million), Volgograd (1.0 million), Perm (1.0 million)
Currency: Russian ruble (RUR)
Languages: Russian (official) 96.3%, many minority languages (roughly 100 other languages are spoken in Russia)
Ethnicity: Russian 77.7%, Tatar 3.7%, Ukrainian 1.4%, Bashkir 1.1%, Chuvash 1%, Chechen 1%, other 10.2%, unspecified 3.9%
Religion: Russian Orthodox 15-20%, Muslim 10-15%, other Christian 2%, Russia has large population of non-practicing believers and non-believers
President: (Mr.) Vladimir Vladimirovich PUTIN (since 7 May 2012)
Prime Minister: (Mr.) Dmitriy Anatolyevich MEDVEDEV (since 8 May 2012)
map


KEY FEATURES

  • Vast variety of natural resources mostly located far from industrial processing centers
  • Huge market with further potential for economic growth
  • Crossroad between the West's and East's economies
  • Leader in the Eurasian Economic Union, an integrated single market of 5 countries and 183 million people
  • Despite political tensions, people in Russia still have the most western type of thinking arguably of all Asian states
  • Labor costs bellow most of the European countries
  • World's largest producer of crude oil and second largest producer of natural gas
  • Top exporter of wheat

MACROECONOMIC OVERVIEW

Selected economic indicators, Russia, 2010 - 2016

    2010 2011 2012 2013 2014 2015 2016*
GDP
Real GDP growth
%
4.5
4.3
3.5
1.3
0.7
-3.7
-1.8
GDP at current prices
€ bn
1,150
1,466
1,690
1,680
1,528
1,194
Foreign trade
Exports
€ bn
299
371
408
397
375
310
Imports
€ bn
173
220
246
237
215
164
Balance
€ bn
127
152
162
160
159
145
Prices
CPI - average inflation rate
%
6.9
8.4
5.1
6.8
7.8
15.5
8.4
PPI - industry - average
%
16.7
-
5.1
3.7
5.9
10.7
Employment
Registered unemployment
%
7.3
6.5
5.5
5.5
5.6
6.5
Average monthly gross wage
520
572
667
704
638
499
Exchange rates
RUR/USD average
30.37
29.41
31.08
31.86
38.51
61.19
RUR/EUR average
40.26
40.88
39.93
42.34
50.95
68.07
*data for 2016 - forecast
Source: Federal Statistical Service, European Commission, IMF, 2016


Russia’s real GDP growth rates reached 8.1% in 2007 and 5.6% in 2008, and gas and oil prices have had a significant impact on Russia’s growth. Significant disparity also exists in regional GDP contributions as Moscow accounts for 20% of Russia’s GDP, oil rich province of Tyumen for 13%, while 72 of total 87 Russia’s jurisdictions combine for 37%. Large enterprises continue to dominate the economy while small and medium size-companies account for only 10 to 15% of GDP.


During Putin's first eight-year-long presidential period (2000-2008), the industry grew by 75%, investments increased by 125%, and agricultural production and construction increased as well, and the average salary increased eightfold. The number of people living below the poverty line also decreased from 30% in 2000 to 14% in 2008. Inflation remained a problem, however, as the government failed to contain the growth of prices.


Since 2008 when Dmitry Medvedev took over the presidential seat and during the Putin’s return to presidency in 2012, the Russian economy has been experiencing its ups-and-downs. In 2009, the world economic crisis took its toll in Russia as the economy experienced a significant drop. Nevertheless, due to smart reactions from the government and the national bank, the Russian economy began to rise again in 2009. The steep growth lasted until 2014, as the Ukraine Crisis, subsequent economic sanctions, and most importantly significant decrease of oil prices put the Russian economy into recession, and the GDP in 2015 dropped by 3.7% and the estimate for 2016 is -1.8%.


In 2014, Russia along with Belarus, Kazakhstan, Armenia and Kyrgyzstan established the Eurasian Economic Union. It is currently an integrated single market of these 5 countries, with 183 million people and a gross domestic product of over USD 4 trillion (PPP). The EEU introduces free movement of goods, capital, services and people and provides for common transport, agriculture and energy policies, with provisions for a single currency and greater integration in the future. The long term plan is to integrate more countries to the union and create "powerful, supra-national union" of sovereign states like the European Union.



STRUCTURE OF ECONOMY

During the 1990s, Russia’s economic structure changed tremendously. Between 1990 and 2010, the share of GDP for the agriculture sector decreased from almost 17% to 4% and industry from 50% to 35% while the share of services sector grew from 35% to 61%.

Heavy industries such as fuels & energy and metallurgy still dominate Russia’s industrial sector accounting for roughly 40% of industrial output. On the other hand, the share of light industry reaches mere 2% of total output. High technology and consumer goods sector are only minor players as well.

Both light and heavy industry are threatened by outdated infrastructure and their inability to compete on the world market.

In the services sector, financial services, tourism, retail services, and banking have grown the fastest, despite an existence of law severely restricting activities of foreign banks in Russia.

Russia is 2nd in the world and not far behind the leading USA in sales and exports of weapons.

Russia’s economy remains commodity-driven; payments from the fuel and energy sector in the form of customs duties and taxes account for nearly half of the federal budget's revenues.

Russia now ranks as the number three destination for software outsourcing behind India and China.


EXPORTS & IMPORTS


Russia is the third trading partner of the EU and the EU is the first trading partner of Russia. Trade between the two economies showed steep growth until mid-2008 when the trend was interrupted by the economic crisis and unilateral measures adopted by Russia, which had a negative impact on EU-Russia trade. Since 2010 mutual trade has resumed its growth only until 2014 and 2015, as EU–Russia trade relations were dominated by European sanctions, with trade liberalization talks placed on hold. Russia’s “counter-sanctions” – bans on imports of agricultural products from Western countries – caused losses to European producers. EU–Russia trade declined 38.5 percent year-on-year between January and September 2015.


Russia and Europe are interdependent in terms of energy. Europe is dependent on Russia as a source of supply for both oil and natural gas, with more than 30% of European crude and natural gas supplies coming from Russia in 2014. More than 70% of Russia's crude exports and almost 90% of Russia's natural gas exports went to Europe.


EU exports to Russia are dominated by machinery and transport equipment, chemicals, pharmaceuticals and agricultural products.


EU imports from Russia are dominated by raw materials, in particular, oil (crude and refined) and gas. The EU is the most important investor in Russia. It is estimated that up to 75% of Foreign Direct Investment stocks in Russia come from EU Member States (including Cyprus).


2015 export and import data:




Main import partners:
China – 10.2%
Germany – 5.5%
USA – 3.3%
Belarus – 2.3%
Italy – 2.3%


Main export partners:
Netherlands – 11.7%
China – 8.2%
Italy – 4.7%
Germany – 4.6%
Japan – 4.2%


Russia external trade - 2015




See references for our track record in Russia.



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