Russia Economy 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 6% 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 has decreased to 31% of GDP, mainly due to decreasing state debt, although 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 an estimated $30 billion in 2007. In 2007, Russia's GDP grew 7.4%, 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 rising food costs, and reached 12% by year-end. Russia has 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, corruption, and widespread 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 legislation 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):
$1.251 trillion (2007 est.)

GDP - real growth rate:
7.4% (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.)

Labor force:
72.4 million (2007 est.)

Labor force - by occupation:
agriculture: 8.5%
industry: 29.7%
services: 61.8% (2006 est.)

Unemployment rate:
7% (2007 est.)

Population below poverty line:
17.6% (2004)

Household income or consumption by percentage share:
lowest 10%: 2.4%
highest 10%: 30.6% (2002)

Distribution of family income - Gini index:
41 (2006)

Inflation rate (consumer prices):
9% annual average
note: 12% at year-end (2007 est.)

Investment (gross fixed):
19.4% of GDP (2007 est.)

Budget:
revenues: $341.7 billion
expenditures: $243.6 billion (2007 est.)

Public debt:
7% of GDP (2007 est.)

Agriculture - products:
grain, sugar beets, sunflower seed, vegetables, fruits; beef, milk

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:
6.5% (2007 est.)

Electricity - production:
904.4 billion kWh (2005)

Electricity - consumption:
779.4 billion kWh (2005)

Electricity - exports:
22.52 billion kWh (2005)

Electricity - imports:
10.14 billion kWh (2005)

Oil - production:
9.677 million bbl/day (2006)

Oil - consumption:
2.916 million bbl/day (2006)

Oil - exports:
7 million bbl/day (2005)

Oil - imports:
100,000 bbl/day (2005)

Oil - proved reserves:
60 billion bbl (1 January 2006 est.)

natural gas - production:
656 billion cu m (2006)

natural gas - consumption:
614.7 billion cu m (2006)

natural gas - exports:
213 billion cu m (2005 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:
$68.5 billion (2007 est.)

Exports:
$348.9 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:
$226.5 billion (2007 est.)

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)

Economic aid - recipient:
$1.322 billion in FY01 from US, $979 million (including $750 million in non-proliferation subsidies); in 2001 from EU, $200 million (2004)

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)

Currency (code):
Russian ruble (RUR)

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