Published as “Overview”

Russia, one of the world's largest economies, possesses a wealth of natural resources and a diverse industrial base. Within the now-dismantled USSR, it had produced 60% of total output, with 55% of the total labor force and 60% of the total capital stock. Russia depends on its world-class deposits of oil and gas not only for its own needs but also for vital hard currency earnings. Self-sufficient in coal and iron ore, it has a crude steel production capacity of about 95 million tons, second only to Japan.

Russia's machine-building sector - 60% of the old USSR's - lags behind world standards of efficiency and quality of product. Other major industrial sectors - chemicals, construction materials, light industry, and food processing - also suffer from quality problems, obsolescent capital equipment, and pollution. Consumer goods have had lower priority, and the product mix has not mirrored household preferences. Furthermore, the transition to a more market-oriented economy has disrupted channels of supply to factories and distribution outlets; substantial imports of foods and medical supplies have helped maintain minimum standards of consumption.

Russia inherited 70% of the former USSR's defense production facilities and is experiencing major social problems during conversion of many of these plants to civilian production. Russia produces almost half of the old USSR's farm products, but most warm-climate crops must be imported. Under the old USSR, production of industrial and agricultural goods often was concentrated in a single firm or a single republic. Today, producing units often have lost their major customers and their major sources of supply, and the market institutions and incentives for adjusting to the new political and economic situations are only slowly emerging.

Rank-and-file Russians will continue to suffer major deprivations in 1992 and beyond before the country begins to realize its great economic potential. The comprehensive economic reform program enacted in January 1992 faces many economic and political hurdles before it will lead to sustained economic growth.

Russia, one of the world's largest economies, possesses a wealth of natural
resources and a diverse industrial base. Within the now-dismantled USSR, it
had produced 60% of total output, with 55% of the total labor force and 60%
of the total capital stock. Russia depends on its world-class deposits of
oil and gas not only for its own needs but also for vital hard currency
earnings. Self-sufficient in coal and iron ore, it has a crude steel
production capacity of about 95 million tons, second only to Japan. Russia's
machine-building sector - 60% of the old USSR's - lags behind world
standards of efficiency and quality of product. Other major industrial
sectors - chemicals, construction materials, light industry, and food
processing - also suffer from quality problems, obsolescent capital
equipment, and pollution. Consumer goods have had lower priority, and the
product mix has not mirrored household preferences. Furthermore, the
transition to a more market-oriented economy has disrupted channels of
supply to factories and distribution outlets; substantial imports of foods
and medical supplies have helped maintain minimum standards of consumption.
Russia inherited 70% of the former USSR's defense production facilities and
is experiencing major social problems during conversion of many of these
plants to civilian production. Russia produces almost half of the old USSR's
farm products, but most warm-climate crops must be imported. Under the old
USSR, production of industrial and agricultural goods often was concentrated
in a single firm or a single republic. Today, producing units often have
lost their major customers and their major sources of supply, and the market
institutions and incentives for adjusting to the new political and economic
situations are only slowly emerging. Rank-and-file Russians will continue to
suffer major deprivations in 1992 and beyond before the country begins to
realize its great economic potential. The comprehensive economic reform
program enacted in January 1992 faces many economic and political hurdles
before it will lead to sustained economic growth.

Published as “Overview”

Russia, a vast country with a wealth of natural resources and a diverse industrial base, continues to experience great difficulties in moving from its old centrally planned economy to a modern market economy. President YEL'TSIN's government made significant strides toward a market economy in 1992 by freeing most prices, slashing defense spending, unifying foreign exchange rates, and launching an ambitious privatization program.

At the same time, GDP fell 19%, according to official statistics, largely reflecting government efforts to restructure the economy, shortages of essential imports caused by the breakdown in former Bloc and interstate trade, and reduced demand following the freeing of prices in January. The actual decline, however, may have been less steep, because industrial and agricultural enterprises had strong incentives to understate output to avoid taxes, and official statistics may not have fully captured the output of the growing private sector.

Despite the large drop in output, unemployment at yearend stood at an estimated 3%-4% of Russia's 74-million-person labor force; many people, however, are working shortened weeks or are on forced leave. Moscow's financial stabilization program got off to a good start at the beginning of 1992 but began to falter by midyear. Under pressure from industrialists and the Supreme Soviet, the government loosened fiscal policies in the second half.

In addition, the Russian Central Bank relaxed its tight credit policy in July at the behest of new Acting Chairman, Viktor GERASHCHENKO. This loosening of financial policies led to a sharp increase in prices during the last quarter, and inflation reached about 25% per month by yearend. The situation of most consumers worsened in 1992. The January price liberalization and a blossoming of private vendors filled shelves across the country with previously scarce food items and consumer goods, but wages lagged behind inflation, making such goods unaffordable for many consumers.

Falling real wages forced most Russians to spend a larger share of their income on food and to alter their eating habits. Indeed, many Russians reduced their consumption of higher priced meat, fish, milk, vegetables, and fruit, in favor of more bread and potatoes. As a result of higher spending on food, consumers reduced their consumption of nonfood goods and services. Despite a slow start and some rough going, the Russian government by the end of 1992 scored some successes in its campaign to break the state's stranglehold on property and improve the environment for private businesses.

More peasant farms were created than expected; the number of consumers purchasing goods from private traders rose sharply; the portion of the population working in the private sector increased to nearly one-fifth; and the nine-month-long slump in the privatization of small businesses was ended in the fall. Although the output of weapons fell sharply in 1992, most defense enterprises continued to encounter numerous difficulties developing and marketing consumer products, establishing new supply links, and securing resources for retooling.

Indeed, total civil production by the defense sector fell in 1992 because of shortages of inputs and lower consumer demand caused by higher prices. Ruptured ties with former trading partners, output declines, and sometimes erratic efforts to move to world prices and decentralize trade - foreign and interstate - took a heavy toll on Russia's commercial relations with other countries. For the second year in a row, foreign trade was down sharply, with exports falling by as much as 25% and imports by 21%. The drop in imports would have been much greater if foreign aid - worth an estimated $8 billion - had not allowed the continued inflow of essential products.

Trade with the other former Soviet republics continued to decline, and support for the ruble as a common currency eroded in the face of Moscow's loose monetary policies and rapidly rising prices throughout the region. At the same time, Russia paid only a fraction of the $20 billion due on the former USSR's roughly $80 billion debt; debt rescheduling remained hung up because of a dispute between Russia and Ukraine over division of the former USSR's assets.

Capital flight also remained a serious problem in 1992. Russia's economic difficulties did not abate in the first quarter of 1993. Monthly inflation remained at double-digit levels and industrial production continued to slump. To reduce the threat of hyperinflation, the government proposed to restrict subsidies to enterprises; raise interest rates; set quarterly limits on credits, the budget deficit, and money supply growth; and impose temporary taxes and cut spending if budget targets are not met. But many legislators and Central Bank officials oppose various of these austerity measures and failed to approve them in the first part of 1993.

Rewritten: too little of the 1992 text remains to mark the changes.
Russia, a vast country with a wealth of natural resources and a diverse
industrial base, continues to experience great difficulties in moving from
its old centrally planned economy to a modern market economy. President
YEL'TSIN's government made significant strides toward a market economy in
1992 by freeing most prices, slashing defense spending, unifying foreign
exchange rates, and launching an ambitious privatization program. At the
same time, GDP fell 19%, according to official statistics, largely
reflecting government efforts to restructure the economy, shortages of
essential imports caused by the breakdown in former Bloc and interstate
trade, and reduced demand following the freeing of prices in January. The
actual decline, however, may have been less steep, because industrial and
agricultural enterprises had strong incentives to understate output to avoid
taxes, and official statistics may not have fully captured the output of the
growing private sector. Despite the large drop in output, unemployment at
yearend stood at an estimated 3%-4% of Russia's 74-million-person labor
force; many people, however, are working shortened weeks or are on forced
leave. Moscow's financial stabilization program got off to a good start at
the beginning of 1992 but began to falter by midyear. Under pressure from
industrialists and the Supreme Soviet, the government loosened fiscal
policies in the second half. In addition, the Russian Central Bank relaxed
its tight credit policy in July at the behest of new Acting Chairman, Viktor
GERASHCHENKO. This loosening of financial policies led to a sharp increase
in prices during the last quarter, and inflation reached about 25% per month
by yearend. The situation of most consumers worsened in 1992. The January
price liberalization and a blossoming of private vendors filled shelves
across the country with previously scarce food items and consumer goods, but
wages lagged behind inflation, making such goods unaffordable for many
consumers. Falling real wages forced most Russians to spend a larger share
of their income on food and to alter their eating habits. Indeed, many
Russians reduced their consumption of higher priced meat, fish, milk,
vegetables, and fruit, in favor of more bread and potatoes. As a result of
higher spending on food, consumers reduced their consumption of nonfood
goods and services. Despite a slow start and some rough going, the Russian
government by the end of 1992 scored some successes in its campaign to break
the state's stranglehold on property and improve the environment for private
businesses. More peasant farms were created than expected; the number of
consumers purchasing goods from private traders rose sharply; the portion of
the population working in the private sector increased to nearly one-fifth;
and the nine-month-long slump in the privatization of small businesses was
ended in the fall. Although the output of weapons fell sharply in 1992, most
defense enterprises continued to encounter numerous difficulties developing
and marketing consumer products, establishing new supply links, and securing
resources for retooling. Indeed, total civil production by the defense
sector fell in 1992 because of shortages of inputs and lower consumer demand
caused by higher prices. Ruptured ties with former trading partners, output
declines, and sometimes erratic efforts to move to world prices and
decentralize trade - foreign and interstate - took a heavy toll on Russia's
commercial relations with other countries. For the second year in a row,
foreign trade was down sharply, with exports falling by as much as 25% and
imports by 21%. The drop in imports would have been much greater if foreign
aid - worth an estimated $8 billion - had not allowed the continued inflow
of essential products. Trade with the other former Soviet republics
continued to decline, and support for the ruble as a common currency eroded
in the face of Moscow's loose monetary policies and rapidly rising prices
throughout the region. At the same time, Russia paid only a fraction of the
$20 billion due on the former USSR's roughly $80 billion debt; debt
rescheduling remained hung up because of a dispute between Russia and
Ukraine over division of the former USSR's assets. Capital flight also
remained a serious problem in 1992. Russia's economic difficulties did not
abate in the first quarter of 1993. Monthly inflation remained at
double-digit levels and industrial production continued to slump. To reduce
the threat of hyperinflation, the government proposed to restrict subsidies
to enterprises; raise interest rates; set quarterly limits on credits, the
budget deficit, and money supply growth; and impose temporary taxes and cut
spending if budget targets are not met. But many legislators and Central
Bank officials oppose various of these austerity measures and failed to
approve them in the first part of 1993.

Published as “Overview”

Russia, a vast country with a wealth of natural resources, a well-educated population, and a diverse industrial base, continues to experience severe difficulties in moving from its old centrally planned economy to a modern market economy. President YEL'TSIN's government has made some progress toward a market economy by freeing most prices, slashing defense spending, unifying foreign exchange rates, and launching an ambitious privatization program.

Yet much of the old order persists and YEL'TSIN faces formidable opposition to further measures such as the reduction of subsidies to old-line industries. Output continues to fall although the mix is gradually becoming more responsive to Russia's needs. According to Russian official data, GDP declined by 12% in 1993 compared with 19% in 1992. Industrial output in 1993 fell 16% with all major sectors taking a hit. Agricultural production, meanwhile, was down 6%. The grain harvest totalled 99 million tons - some 8 million tons less than in 1992.

Unemployment climbed in 1993 but remained low by Western standards. The official number of unemployed rose from 578,000 at the beginning of 1993 to about 1 million - or roughly 1.4% of the work force - by yearend. According to the Russian labor minister, the actual number of unemployed probably was closer to 4 million. Government fears of large-scale unemployment continued to hamper industrial restructuring efforts. According to official statistics, average real wages remained flat.

Nonetheless, a substantial portion of the population, particularly the elderly and people in remote areas, finds its well-being steadily shrinking. The disparity in incomes between the rich and poor continued to rise in 1993, primarily reflecting the high earnings of enterprise managers and persons employed in the emerging private sector. The government tried to narrow the income gap by raising the wages of budget-funded workers - mainly teachers and health care specialists.

Official data may overstate hardships, because many Russians supplement their income by moonlighting or by bartering goods and services, activities that often go unreported. Russia made good progress on privatization in 1993 despite active opposition from key cabinet members, hard-line legislators, and antireform regional leaders. By yearend, for example, roughly 35% of Russia's medium and large state enterprises had been auctioned, while the number of private farms in Russia increased by 86,000, reaching a total of 170,000.

As a result, about 6% of agricultural land now has been privatized. Financial stabilization continued to remain a challenge for the government. Moscow tightened financial policies in early 1993 - including postponing planned budget spending - and succeeded in reducing monthly inflation from 27% in January to 20% in May and June. In the summer, however, the government relaxed austerity measures in the face of mounting pressure from industry and agriculture, sparking a new round of inflation; the monthly inflation rate jumped to 25% in August.

In response, Moscow announced a package of measures designed to curb government spending and inflation. It included eliminating bread subsidies, delaying payment obligations, raising interest rates, and phasing out concessionary Central Bank credits to enterprises and regions. The measures met with some success; the monthly inflation rate declined to 13% in December. According to official statistics, Russia's 1993 trade with nations outside the former Soviet Union produced a $16 billion surplus, up from $6 billion in 1992.

Moscow arrested the steep drop in exports that it had been suffering as a result of ruptured ties with former trading partners, output declines, and erratic efforts to move to world prices. Foreign sales - comprised largely of oil, natural gas, and other raw materials - grew slightly. Imports were down by 15% or so as a result of new import taxes and Moscow's reluctance to increase its debt burden by purchasing grain and other goods with foreign credits.

Russian trade with other former Soviet republics continued to decline and yielded a surplus of some $5 billion. At the same time, Russia paid only a fraction of the roughly $20 billion in debt coming due in 1993, and by mid-year, Russia's foreign debt had amounted to $81.5 billion. While Moscow reached agreement to restructure debts with Paris Club official creditors in April 1993, Moscow's refusal to waive its right to sovereign immunity kept Russia and its bank creditors from agreeing to restructure Moscow's commercial loans.

Capital flight continued to be a serious problem in 1993, with billions of dollars in assets owned by Russians being parked abroad at yearend. Russia's capital stock continues to deteriorate because of insufficient maintenance and new construction. The capital stock on average is twice the age of capital stock in the West. Many years will pass before Russia can take full advantage of its natural resources and its human assets.

Rewritten: too little of the 1993 text remains to mark the changes.
Russia, a vast country with a wealth of natural resources, a
well-educated population, and a diverse industrial base, continues to
experience severe difficulties in moving from its old centrally
planned economy to a modern market economy. President YEL'TSIN's
government has made some progress toward a market economy by freeing
most prices, slashing defense spending, unifying foreign exchange
rates, and launching an ambitious privatization program. Yet much of
the old order persists and YEL'TSIN faces formidable opposition to
further measures such as the reduction of subsidies to old-line
industries. Output continues to fall although the mix is gradually
becoming more responsive to Russia's needs. According to Russian
official data, GDP declined by 12% in 1993 compared with 19% in 1992.
Industrial output in 1993 fell 16% with all major sectors taking a
hit. Agricultural production, meanwhile, was down 6%. The grain
harvest totalled 99 million tons - some 8 million tons less than in
1992. Unemployment climbed in 1993 but remained low by Western
standards. The official number of unemployed rose from 578,000 at the
beginning of 1993 to about 1 million - or roughly 1.4% of the work
force - by yearend. According to the Russian labor minister, the
actual number of unemployed probably was closer to 4 million.
Government fears of large-scale unemployment continued to hamper
industrial restructuring efforts. According to official statistics,
average real wages remained flat. Nonetheless, a substantial portion
of the population, particularly the elderly and people in remote
areas, finds its well-being steadily shrinking. The disparity in
incomes between the rich and poor continued to rise in 1993, primarily
reflecting the high earnings of enterprise managers and persons
employed in the emerging private sector. The government tried to
narrow the income gap by raising the wages of budget-funded workers -
mainly teachers and health care specialists. Official data may
overstate hardships, because many Russians supplement their income by
moonlighting or by bartering goods and services, activities that often
go unreported. Russia made good progress on privatization in 1993
despite active opposition from key cabinet members, hard-line
legislators, and antireform regional leaders. By yearend, for example,
roughly 35% of Russia's medium and large state enterprises had been
auctioned, while the number of private farms in Russia increased by
86,000, reaching a total of 170,000. As a result, about 6% of
agricultural land now has been privatized. Financial stabilization
continued to remain a challenge for the government. Moscow tightened
financial policies in early 1993 - including postponing planned budget
spending - and succeeded in reducing monthly inflation from 27% in
January to 20% in May and June. In the summer, however, the government
relaxed austerity measures in the face of mounting pressure from
industry and agriculture, sparking a new round of inflation; the
monthly inflation rate jumped to 25% in August. In response, Moscow
announced a package of measures designed to curb government spending
and inflation. It included eliminating bread subsidies, delaying
payment obligations, raising interest rates, and phasing out
concessionary Central Bank credits to enterprises and regions. The
measures met with some success; the monthly inflation rate declined to
13% in December. According to official statistics, Russia's 1993 trade
with nations outside the former Soviet Union produced a $16 billion
surplus, up from $6 billion in 1992. Moscow arrested the steep drop in
exports that it had been suffering as a result of ruptured ties with
former trading partners, output declines, and erratic efforts to move
to world prices. Foreign sales - comprised largely of oil, natural
gas, and other raw materials - grew slightly. Imports were down by 15%
or so as a result of new import taxes and Moscow's reluctance to
increase its debt burden by purchasing grain and other goods with
foreign credits. Russian trade with other former Soviet republics
continued to decline and yielded a surplus of some $5 billion. At the
same time, Russia paid only a fraction of the roughly $20 billion in
debt coming due in 1993, and by mid-year, Russia's foreign debt had
amounted to $81.5 billion. While Moscow reached agreement to
restructure debts with Paris Club official creditors in April 1993,
Moscow's refusal to waive its right to sovereign immunity kept Russia
and its bank creditors from agreeing to restructure Moscow's
commercial loans. Capital flight continued to be a serious problem in
1993, with billions of dollars in assets owned by Russians being
parked abroad at yearend. Russia's capital stock continues to
deteriorate because of insufficient maintenance and new construction.
The capital stock on average is twice the age of capital stock in the
West. Many years will pass before Russia can take full advantage of
its natural resources and its human assets.

Published as “Overview”

Russia, a vast country with a wealth of natural resources, a well-educated population, and a diverse industrial base, continues to experience formidable difficulties in moving from its old centrally planned economy to a modern market economy. President YEL'TSIN's government has made substantial strides in converting to a market economy since launching its economic reform program in January 1992 by freeing nearly all prices, slashing defense spending, eliminating the old centralized distribution system, completing an ambitious voucher privatization program, establishing private financial institutions, and decentralizing foreign trade.

Russia, however, has made little progress in a number of key areas that are needed to provide a solid foundation for the transition to a market economy. Financial stabilization has remained elusive, with wide swings in monthly inflation rates. Only limited restructuring of industry has occurred so far because of a scarcity of investment funds and the failure of enterprise managers to make hard cost-cutting decisions.

In addition, Moscow has yet to develop a social safety net that would allow faster restructuring by relieving enterprises of the burden of providing social benefits for their workers and has been slow to develop the legal framework necessary to fully support a market economy and to encourage foreign investment. As a result, output has continued to fall. According to Russian official data, which probably overstate the fall, GDP declined by 15% in 1994 compared with a 12% decline in 1993.

Industrial output in 1994 fell 21% with all major sectors taking a hit. Agricultural production in 1994 was down 9%. The grain harvest totaled 81 million tons, some 15 million tons less than in 1993. Unemployment climbed to an estimated 6.6 million or about 7% of the work force by yearend 1994. Floundering Russian firms have already had to put another 4.8 million workers on involuntary, unpaid leave or shortened workweeks.

Government fears of large-scale unemployment continued to hamper industrial restructuring efforts. According to official Russian data, real per capita income was up nearly 18% in 1994 compared with 1993, in part because many Russians are working second jobs. Most Russians perceive that they are worse off now because of growing crime and health problems and mounting wage arrears. Russia has made significant headway in privatizing state assets, completing its voucher privatization program at midyear 1994.

At least a portion of about 110,000 state enterprises were transferred to private hands by the end of 1994. Including partially privatized firms, the private sector accounted for roughly half of GDP in 1994. Financial stabilization continued to remain a challenge for the government. Moscow tightened financial policies in late 1993 and early 1994, including postponing planned budget spending, and succeeded in reducing monthly inflation from 18% in January to about 5% in July and August.

At midyear, however, the government relaxed austerity measures in the face of mounting pressure from industry and agriculture, sparking a new round of inflation; the monthly inflation rate jumped to roughly 15% per month during the fourth quarter. In response, Moscow announced a fairly tight government budget for 1995 designed to bring monthly inflation down to around 1% by the end of 1995. According to official statistics, Russia's 1994 trade with nations outside the former Soviet Union produced a $12.3 billion surplus, up from $11.3 billion in 1993.

Foreign sales - comprised largely of oil, natural gas, and other raw materials - grew more than 8%. Imports also were up 8% as demand for food and other consumer goods surged. Russian trade with other former Soviet republics continued to decline. At the same time, Russia paid only a fraction of the roughly $20 billion in debt that came due in 1994, and by the end of the year, Russia's hard currency foreign debt had risen to nearly $100 billion.

Moscow reached agreement to restructure debts with Paris Club official creditors in mid-1994 and concluded a preliminary deal with its commercial bank creditors late in the year to reschedule debts owed them in early 1995. Capital flight continued to be a serious problem in 1994, with billions of additional dollars in assets being moved abroad, primarily to bank accounts in Europe. Russia's physical plant continues to deteriorate because of insufficient maintenance and new construction. Plant and equipment on average are twice the age of the West's. Many years will pass before Russia can take full advantage of its natural resources and its human assets.

Rewritten: too little of the 1994 text remains to mark the changes.
Russia, a vast country with a wealth of natural resources, a
well-educated population, and a diverse industrial base, continues to
experience formidable difficulties in moving from its old centrally
planned economy to a modern market economy. President YEL'TSIN's
government has made substantial strides in converting to a market
economy since launching its economic reform program in January 1992 by
freeing nearly all prices, slashing defense spending, eliminating the
old centralized distribution system, completing an ambitious voucher
privatization program, establishing private financial institutions,
and decentralizing foreign trade. Russia, however, has made little
progress in a number of key areas that are needed to provide a solid
foundation for the transition to a market economy. Financial
stabilization has remained elusive, with wide swings in monthly
inflation rates. Only limited restructuring of industry has occurred
so far because of a scarcity of investment funds and the failure of
enterprise managers to make hard cost-cutting decisions. In addition,
Moscow has yet to develop a social safety net that would allow faster
restructuring by relieving enterprises of the burden of providing
social benefits for their workers and has been slow to develop the
legal framework necessary to fully support a market economy and to
encourage foreign investment. As a result, output has continued to
fall. According to Russian official data, which probably overstate the
fall, GDP declined by 15% in 1994 compared with a 12% decline in 1993.
Industrial output in 1994 fell 21% with all major sectors taking a
hit. Agricultural production in 1994 was down 9%. The grain harvest
totaled 81 million tons, some 15 million tons less than in 1993.
Unemployment climbed to an estimated 6.6 million or about 7% of the
work force by yearend 1994. Floundering Russian firms have already had
to put another 4.8 million workers on involuntary, unpaid leave or
shortened workweeks. Government fears of large-scale unemployment
continued to hamper industrial restructuring efforts. According to
official Russian data, real per capita income was up nearly 18% in
1994 compared with 1993, in part because many Russians are working
second jobs. Most Russians perceive that they are worse off now
because of growing crime and health problems and mounting wage
arrears. Russia has made significant headway in privatizing state
assets, completing its voucher privatization program at midyear 1994.
At least a portion of about 110,000 state enterprises were transferred
to private hands by the end of 1994. Including partially privatized
firms, the private sector accounted for roughly half of GDP in 1994.
Financial stabilization continued to remain a challenge for the
government. Moscow tightened financial policies in late 1993 and early
1994, including postponing planned budget spending, and succeeded in
reducing monthly inflation from 18% in January to about 5% in July and
August. At midyear, however, the government relaxed austerity measures
in the face of mounting pressure from industry and agriculture,
sparking a new round of inflation; the monthly inflation rate jumped
to roughly 15% per month during the fourth quarter. In response,
Moscow announced a fairly tight government budget for 1995 designed to
bring monthly inflation down to around 1% by the end of 1995.
According to official statistics, Russia's 1994 trade with nations
outside the former Soviet Union produced a $12.3 billion surplus, up
from $11.3 billion in 1993. Foreign sales - comprised largely of oil,
natural gas, and other raw materials - grew more than 8%. Imports also
were up 8% as demand for food and other consumer goods surged. Russian
trade with other former Soviet republics continued to decline. At the
same time, Russia paid only a fraction of the roughly $20 billion in
debt that came due in 1994, and by the end of the year, Russia's hard
currency foreign debt had risen to nearly $100 billion. Moscow reached
agreement to restructure debts with Paris Club official creditors in
mid-1994 and concluded a preliminary deal with its commercial bank
creditors late in the year to reschedule debts owed them in early
1995. Capital flight continued to be a serious problem in 1994, with
billions of additional dollars in assets being moved abroad, primarily
to bank accounts in Europe. Russia's physical plant continues to
deteriorate because of insufficient maintenance and new construction.
Plant and equipment on average are twice the age of the West's. Many
years will pass before Russia can take full advantage of its natural
resources and its human assets.

Russia, a vast country with a wealth of natural resources, a well-educated population, and a diverse industrial base, continues to experience formidable difficulties in moving from its old centrally planned economy to a modern-market economy. The break-up of the USSR into 15 successor states in late 1991 destroyed major economic links that have been only partially replaced. As a result of these dislocations and the failure of the government to implement a rigorous and consistent reform program, output in Russia has dropped by one-third since 1990 (instead of the one-half previously estimated). On the one hand, President YEL'TSIN's government has made substantial strides in converting to a market economy since launching its economic reform program in January 1992 by freeing nearly all prices, slashing defense spending, eliminating the old centralized distribution system, completing an ambitious voucher privatization program in 1994, establishing private financial institutions, and decentralizing foreign trade.

On the other hand, Russia has made little progress in a number of key areas that are needed to provide a solid foundation for the transition to a market economy; and the strong showing of the communists and nationalists in the Duma elections in December 1995 casts a shadow over prospects for further reforms. In 1995, the new cash privatization program went slower than planned. The state claims that the nonstate sector produced approximately 70% of GDP in 1995, up from 62% in 1994, although these figures apparently include many enterprises that have only nominally moved out of state control.

Moscow has been slow to develop the legal framework necessary to fully support a market economy and to encourage foreign investment. Stockholder rights remain ill-defined and the Duma has yet to adopt a land code that would allow development of land markets as sources of needed capital. Russia's securities market remains largely unregulated and suffers from the lack of a comprehensive securities law. In addition, Moscow has yet to develop a social safety net that would allow faster restructuring by relieving enterprises of the burden of providing social benefits for their workers.

Most rank-and-file Russians perceive they are worse off because of growing crime and health problems, the drop in real wages, the great rise in wage arrears, and the widespread threat of unemployment. The number of Russians living below the official poverty level rose by 10% to 36.6 million people, or 25% of the population. The decline in output slowed during 1995, and some sectors showed signs of a turnaround; analysts forecast the resumption of growth in 1996 - at a low rate.

Russian official data, which fail to capture a considerable portion of private sector output and employment, show that GDP declined by 4% in 1995, as compared with a 15% decline in 1994. Despite continued declines in agricultural and industrial production, unemployment climbed only slowly to about 8% of the work force by yearend because government policies aimed at softening the impact of reforms have created incentives for enterprises to keep workers on the rolls even as production slowed to a crawl.

Moscow renewed tightened financial policies in early 1995 and succeeded in reducing monthly consumer price inflation from 18% in January to about 3% in December, the lowest monthly rate since the beginning of reform. According to official trade statistics, Russia ran a $19.9 billion trade surplus for 1995, up from $15.9 billion in 1994. It continued to shift its trade away from the other former Soviet republics toward the West, with the CIS countries' share of Russian trade falling to 22% in 1995.

Russia made good progress with official and commercial creditors in 1995 in resolving the issue of its $105 billion in Soviet-era debts. When completed, these Paris Club and London Club rescheduling agreements will reduce Russia's repayment liabilities from $20 billion to less than $5 billion annually through the end of the decade. Capital flight reportedly continued to be a problem in 1995, with billions of additional dollars in assets being moved abroad, primarily to bank accounts in Europe.

Rewritten: too little of the 1995 text remains to mark the changes.
Russia, a vast country with a wealth of natural
resources, a well-educated population, and a diverse industrial
base, continues to experience formidable difficulties in moving from
its old centrally planned economy to a modern-market economy. The
break-up of the USSR into 15 successor states in late 1991 destroyed
major economic links that have been only partially replaced. As a
result of these dislocations and the failure of the government to
implement a rigorous and consistent reform program, output in Russia
has dropped by one-third since 1990 (instead of the one-half
previously estimated). On the one hand, President YEL'TSIN's
government has made substantial strides in converting to a market
economy since launching its economic reform program in January 1992
by freeing nearly all prices, slashing defense spending, eliminating
the old centralized distribution system, completing an ambitious
voucher privatization program in 1994, establishing private
financial institutions, and decentralizing foreign trade. On the
other hand, Russia has made little progress in a number of key areas
that are needed to provide a solid foundation for the transition to
a market economy; and the strong showing of the communists and
nationalists in the Duma elections in December 1995 casts a shadow
over prospects for further reforms. In 1995, the new cash
privatization program went slower than planned. The state claims
that the nonstate sector produced approximately 70% of GDP in 1995,
up from 62% in 1994, although these figures apparently include many
enterprises that have only nominally moved out of state control.
Moscow has been slow to develop the legal framework necessary to
fully support a market economy and to encourage foreign investment.
Stockholder rights remain ill-defined and the Duma has yet to adopt
a land code that would allow development of land markets as sources
of needed capital. Russia's securities market remains largely
unregulated and suffers from the lack of a comprehensive securities
law. In addition, Moscow has yet to develop a social safety net that
would allow faster restructuring by relieving enterprises of the
burden of providing social benefits for their workers. Most
rank-and-file Russians perceive they are worse off because of
growing crime and health problems, the drop in real wages, the great
rise in wage arrears, and the widespread threat of unemployment. The
number of Russians living below the official poverty level rose by
10% to 36.6 million people, or 25% of the population. The decline in
output slowed during 1995, and some sectors showed signs of a
turnaround; analysts forecast the resumption of growth in 1996 - at
a low rate. Russian official data, which fail to capture a
considerable portion of private sector output and employment, show
that GDP declined by 4% in 1995, as compared with a 15% decline in
1994. Despite continued declines in agricultural and industrial
production, unemployment climbed only slowly to about 8% of the work
force by yearend because government policies aimed at softening the
impact of reforms have created incentives for enterprises to keep
workers on the rolls even as production slowed to a crawl. Moscow
renewed tightened financial policies in early 1995 and succeeded in
reducing monthly consumer price inflation from 18% in January to
about 3% in December, the lowest monthly rate since the beginning of
reform. According to official trade statistics, Russia ran a $19.9
billion trade surplus for 1995, up from $15.9 billion in 1994. It
continued to shift its trade away from the other former Soviet
republics toward the West, with the CIS countries' share of Russian
trade falling to 22% in 1995. Russia made good progress with
official and commercial creditors in 1995 in resolving the issue of
its $105 billion in Soviet-era debts. When completed, these Paris
Club and London Club rescheduling agreements will reduce Russia's
repayment liabilities from $20 billion to less than $5 billion
annually through the end of the decade. Capital flight reportedly
continued to be a problem in 1995, with billions of additional
dollars in assets being moved abroad, primarily to bank accounts in
Europe.

Published as “Economy - overview”

Russia, a vast country with a wealth of natural resources, a well-educated population, and a diverse, but declining, industrial base, continues to experience formidable difficulties in moving from its old centrally planned economy to a modern market economy. Most of 1996 was a lost year for economic reforms, with government officials focused in the first half of the year on President YEL'TSIN's reelection and then on his medical problems.

The only major success was in the fight against inflation, which fell from 131% in 1995 to 22% in 1996. Russia failed to make any progress in restructuring its social welfare programs to target the most needy - among whom are many of the old pensioners - or to pass needed tax reform. While approximately 75% of industry has now been privatized, the agricultural sector has undergone little reform since the break-up of the Soviet Union.

Stockholder rights remain weak while crime and corruption are rampant in much of the economy. Many enterprises continue to operate without hard budget constraints, resulting in barter trade and increased inter-enterprise debts. According to official statistics, the Russian economy declined for the fifth straight year since the beginning of reforms, with GDP in 1996 falling by 6% and industrial output by 5%. The true size of the Russian economy remains controversial, however, with estimates of unreported economic activity ranging from 20%-50% of GDP. Indeed, according to Russian statistics, the Russian consumer has seen a small improvement in the last several years, with real average incomes growing by about 8% from early 1993 to late 1996.

The share of the Russian population living below the poverty line is said to have dropped from one-third in early 1993 to one-fifth in late 1996. Few Russians lack basic necessities, and ownership of consumer goods such as VCRs and automobiles has increased markedly. The growth of wage and pension arrears slowed in the second half of 1996, and the government pledged to clear all budget-funded wage and pension arrears by the end of 1997.

The government continued to be plagued with tax collection problems during 1996, forcing it to cut its planned spending by 18%. A crackdown on major tax debtors at the end of the year had only limited success. Spending by all levels of government remains high, between 40%-45% of GDP. The economy is continuing its integration into world markets. Russia's trade surplus, after adjustment for unreported "shuttle" trade, grew to a record $28.5 billion in 1996, according to official Russian statistics.

Export growth, which slowed from 18% to 9%, was due mostly to increased raw material prices. After increasing by 15% in 1995, imports dipped by 2% in 1996 as Russian demand for Western consumer goods slackened. Russia is continuing to make progress in its WTrO negotiations; the government has made quick accession one of its major policy goals. The continued unsettled economic and political situation has discouraged foreign investment, which totaled only $6.5 billion in 1996, including $2.1 billion in direct investment; furthermore, capital flight continues to exceed in volume the inflow of foreign capital.

The central bank estimates that $30 billion in US currency circulates in the Russian economy. In March 1997, YEL'TSIN signaled his intention to restart stalled economic reforms by reorganizing the cabinet, bringing in a new team of ministers with strong reform credentials.

Rewritten: too little of the 1996 text remains to mark the changes.
Russia, a vast country with a wealth of natural
resources, a well-educated population, and a diverse, but declining,
industrial base, continues to experience formidable difficulties in
moving from its old centrally planned economy to a modern market
economy. Most of 1996 was a lost year for economic reforms, with
government officials focused in the first half of the year on
President YEL'TSIN's reelection and then on his medical problems. The
only major success was in the fight against inflation, which fell from
131% in 1995 to 22% in 1996. Russia failed to make any progress in
restructuring its social welfare programs to target the most needy -
among whom are many of the old pensioners - or to pass needed tax
reform. While approximately 75% of industry has now been privatized,
the agricultural sector has undergone little reform since the break-up
of the Soviet Union. Stockholder rights remain weak while crime and
corruption are rampant in much of the economy. Many enterprises
continue to operate without hard budget constraints, resulting in
barter trade and increased inter-enterprise debts. According to
official statistics, the Russian economy declined for the fifth
straight year since the beginning of reforms, with GDP in 1996 falling
by 6% and industrial output by 5%. The true size of the Russian
economy remains controversial, however, with estimates of unreported
economic activity ranging from 20%-50% of GDP. Indeed, according to
Russian statistics, the Russian consumer has seen a small improvement
in the last several years, with real average incomes growing by about
8% from early 1993 to late 1996. The share of the Russian population
living below the poverty line is said to have dropped from one-third
in early 1993 to one-fifth in late 1996. Few Russians lack basic
necessities, and ownership of consumer goods such as VCRs and
automobiles has increased markedly. The growth of wage and pension
arrears slowed in the second half of 1996, and the government pledged
to clear all budget-funded wage and pension arrears by the end of
1997. The government continued to be plagued with tax collection
problems during 1996, forcing it to cut its planned spending by 18%. A
crackdown on major tax debtors at the end of the year had only limited
success. Spending by all levels of government remains high, between
40%-45% of GDP. The economy is continuing its integration into world
markets. Russia's trade surplus, after adjustment for unreported
"shuttle" trade, grew to a record $28.5 billion in 1996, according to
official Russian statistics. Export growth, which slowed from 18% to
9%, was due mostly to increased raw material prices. After increasing
by 15% in 1995, imports dipped by 2% in 1996 as Russian demand for
Western consumer goods slackened. Russia is continuing to make
progress in its WTrO negotiations; the government has made quick
accession one of its major policy goals. The continued unsettled
economic and political situation has discouraged foreign investment,
which totaled only $6.5 billion in 1996, including $2.1 billion in
direct investment; furthermore, capital flight continues to exceed in
volume the inflow of foreign capital. The central bank estimates that
$30 billion in US currency circulates in the Russian economy. In March
1997, YEL'TSIN signaled his intention to restart stalled economic
reforms by reorganizing the cabinet, bringing in a new team of
ministers with strong reform credentials.

Published as “Economy-overview”

Russia, a vast country with a wealth of natural resources, a well-educated population, and a diverse, but declining, industrial base, continues to experience formidable difficulties in moving from its old centrally planned economy to a modern market economy. After seven consecutive years of contraction 1990-96 in which GDP fell by one-third, GDP grew by 0.4% in 1997, according to official statistics. Moscow continued to make strides in its battle against inflation, which fell to 11%, half the 1996 rate.

The central government made good on most back wages owed public-sector employees-including the military-although the stock of wage arrears to employees of private enterprises remained large. Privatization revenues increased significantly, largely on the strength of a few high-profile tenders, such as that of telecommunications giant Svyazinvest. On the downside, Moscow continued to struggle with a severe fiscal imbalance.

Lagging tax collections led the government to adopt a revised budget in spring 1997 that cut spending by about 20% despite protests from the legislature. Russia's traditional trade surplus continued to contract-largely because of soft international commodity prices-and Moscow's WTrO accession made only halting progress. Although President YEL'TSIN brought in a new economic team early in 1997, key structural reform initiatives continue to move slowly.

A revised tax code remains stuck in the Duma, while little progress is being made on agricultural land reform. Small business development has lagged. Prospects for a return to robust growth have been set back by the spillover from Asia's financial turmoil, which hit Russia hard during the last quarter of 1997. Moscow at first tried to both support the ruble and keep interest rates down, but this policy proved unsustainable, and in early December 1997 the Central Bank let interest rates rise sharply.

As the year ended, Russian authorities were attempting to put the best face on the financial situation, while at the same time scaling back their previous optimistic growth projections for 1998 to 1%-2%. Because of Russia's severe macroeconomic constraints, resources allocated to the military sector have declined sharply since the implosion of the USSR in December 1991.

Rewritten: too little of the 1997 text remains to mark the changes.
Russia, a vast country with a wealth of natural
resources, a well-educated population, and a diverse, but declining,
industrial base, continues to experience formidable difficulties in
moving from its old centrally planned economy to a modern market
economy. After seven consecutive years of contraction 1990-96 in which
GDP fell by one-third, GDP grew by 0.4% in 1997, according to official
statistics. Moscow continued to make strides in its battle against
inflation, which fell to 11%, half the 1996 rate. The central
government made good on most back wages owed public-sector
employees-including the military-although the stock of wage arrears to
employees of private enterprises remained large. Privatization
revenues increased significantly, largely on the strength of a few
high-profile tenders, such as that of telecommunications giant
Svyazinvest. On the downside, Moscow continued to struggle with a
severe fiscal imbalance. Lagging tax collections led the government to
adopt a revised budget in spring 1997 that cut spending by about 20%
despite protests from the legislature. Russia's traditional trade
surplus continued to contract-largely because of soft international
commodity prices-and Moscow's WTrO accession made only halting
progress. Although President YEL'TSIN brought in a new economic team
early in 1997, key structural reform initiatives continue to move
slowly. A revised tax code remains stuck in the Duma, while little
progress is being made on agricultural land reform. Small business
development has lagged. Prospects for a return to robust growth have
been set back by the spillover from Asia's financial turmoil, which
hit Russia hard during the last quarter of 1997. Moscow at first tried
to both support the ruble and keep interest rates down, but this
policy proved unsustainable, and in early December 1997 the Central
Bank let interest rates rise sharply. As the year ended, Russian
authorities were attempting to put the best face on the financial
situation, while at the same time scaling back their previous
optimistic growth projections for 1998 to 1%-2%. Because of Russia's
severe macroeconomic constraints, resources allocated to the military
sector have declined sharply since the implosion of the USSR in
December 1991.

Published as “Economy--overview”

Seven years after the collapse of the USSR, Russia is still struggling to establish a modern market economy and achieve strong economic growth. Russian GDP has contracted an estimated 43% since 1991, including a 5% drop in 1998, despite the country's wealth of natural resources, its well-educated population, and its diverse--although increasingly dilapidated--industrial base. By the end of 1997, Russia had achieved some progress.

Inflation had been brought under control, the ruble was stabilized, and an ambitious privatization program had transferred thousands of enterprises to private ownership. Some important market-oriented laws were also passed, including a commercial code governing business relations and an arbitration court for resolving economic disputes. But in 1998, the Asian financial crisis swept through the country, contributing to a sharp decline in russia's earnings from oil exports and resulting in an exodus of foreign investors.

Matters came to a head in August 1998 when the government allowed the ruble to fall precipitously and stopped payment on $40 billion in ruble bonds. Ongoing problems include an undeveloped legal and financial system, poor progress on restructuring the military-industrial complex, and persistently large budget deficits, largely reflecting the inability of successive governments to collect sufficient taxes. Russia's transition to a market economy has also been slowed by the growing prevalence of payment arrears and barter and by widespread corruption.

The severity of Russia's economic problems is dramatized by the large annual decline in population, estimated by some observers at 800,000 people, caused by environmental hazards, the decline in health care, and the unwillingness of people to have children.

Rewritten: too little of the 1998 text remains to mark the changes.
Seven years after the collapse of the USSR,
Russia is still struggling to establish a modern market economy and
achieve strong economic growth. Russian GDP has contracted an
estimated 43% since 1991, including a 5% drop in 1998, despite the
country's wealth of natural resources, its well-educated population,
and its diverse--although increasingly dilapidated--industrial base.
By the end of 1997, Russia had achieved some progress. Inflation had
been brought under control, the ruble was stabilized, and an
ambitious privatization program had transferred thousands of
enterprises to private ownership. Some important market-oriented
laws were also passed, including a commercial code governing
business relations and an arbitration court for resolving economic
disputes. But in 1998, the Asian financial crisis swept through the
country, contributing to a sharp decline in russia's earnings from
oil exports and resulting in an exodus of foreign investors. Matters
came to a head in August 1998 when the government allowed the ruble
to fall precipitously and stopped payment on $40 billion in ruble
bonds. Ongoing problems include an undeveloped legal and financial
system, poor progress on restructuring the military-industrial
complex, and persistently large budget deficits, largely reflecting
the inability of successive governments to collect sufficient taxes.
Russia's transition to a market economy has also been slowed by the
growing prevalence of payment arrears and barter and by widespread
corruption. The severity of Russia's economic problems is dramatized
by the large annual decline in population, estimated by some
observers at 800,000 people, caused by environmental hazards, the
decline in health care, and the unwillingness of people to have
children.

Published as “Economy - overview”

Nine years after the collapse of the USSR, Russia is still struggling to establish a modern market economy and achieve strong economic growth. Russian GDP has contracted an estimated 45% since 1991, despite the country's wealth of natural resources, its well-educated population, and its diverse - although increasingly dilapidated - industrial base. By the end of 1997, Russia had achieved some progress. Inflation had been brought under control, the ruble was stabilized, and an ambitious privatization program had transferred thousands of enterprises to private ownership.

Some important market-oriented laws had also been passed, including a commercial code governing business relations and the establishment of an arbitration court for resolving economic disputes. But in 1998, the Asian financial crisis swept through the country, contributing to a sharp decline in Russia's earnings from oil exports and resulting in an exodus of foreign investors. Matters came to a head in August 1998 when the government allowed the ruble to fall precipitously and stopped payment on $40 billion in ruble bonds.

In 1999, output increased for only the second time since 1991, by an officially estimated 3.2%, regaining much of the 4.6% drop of 1998. This increase was achieved despite a year of potential turmoil that included the tenure of three premiers and culminated in the New Year's Eve resignation of President YELTSIN. Of great help was the tripling of international oil prices in the second half of 1999, raising the export surplus to $29 billion.

On the negative side, inflation rose to an average 86% in 1999, compared with a 28% average in 1998 and a hoped-for 30% average in 2000. Ordinary persons found their wages falling by roughly 30% and their pensions by 45%. The PUTIN government has given high priority to supplementing low incomes by paying down wage and pension arrears. Many investors, both domestic and international remain on the sidelines, scared off by Russia's long-standing problems with capital flight, reliance on barter transactions, widespread corruption among officials, and endemic organized crime.

~~Seven~~ Nine years after the collapse of the USSR,
Russia is still struggling to establish a modern market economy and
achieve strong economic growth. Russian GDP has contracted an
estimated ~~43%~~ 45% since 1991, ~~including a 5% drop in 1998,~~ despite the
country's wealth of natural resources, its well-educated population,
and its ~~diverse--although~~ diverse - although increasingly ~~dilapidated--industrial~~ dilapidated - industrial base.
By the end of 1997, Russia had achieved some progress. Inflation had
been brought under control, the ruble was stabilized, and an
ambitious privatization program had transferred thousands of
enterprises to private ownership. Some important market-oriented
laws ~~were~~ had also been passed, including a commercial code governing
business relations and the establishment of an arbitration court for resolving economic
disputes. But in 1998, the Asian financial crisis swept through the
country, contributing to a sharp decline in ~~russia's~~ Russia's earnings from
oil exports and resulting in an exodus of foreign investors. Matters
came to a head in August 1998 when the government allowed the ruble
to fall precipitously and stopped payment on $40 billion in ruble
bonds. ~~Ongoing problems include~~ In 1999, output increased for only the second time since 1991, by an undeveloped legal and financial
system, poor progress on restructuring officially estimated 3.2%, regaining much of the military-industrial
complex, 4.6% drop of 1998. This increase was achieved despite a year of potential turmoil that included the tenure of three premiers and ~~persistently large budget deficits, largely reflecting~~
culminated in the ~~inability~~ New Year's Eve resignation of ~~successive governments~~ President YELTSIN. Of great help was the tripling of international oil prices in the second half of 1999, raising the export surplus to collect sufficient taxes.
Russia's transition $29 billion. On the negative side, inflation rose to an average 86% in 1999, compared with a market economy has also been slowed by the
growing prevalence of payment arrears 28% average in 1998 and ~~barter~~ a hoped-for 30% average in 2000. Ordinary persons found their wages falling by roughly 30% and their pensions by widespread
corruption. 45%. The ~~severity of Russia's economic problems is dramatized~~
PUTIN government has given high priority to supplementing low incomes by paying down wage and pension arrears. Many investors, both domestic and international remain on the large annual decline in population, estimated by some
observers at 800,000 people, caused sidelines, scared off by environmental hazards, the
decline in health care, Russia's long-standing problems with capital flight, reliance on barter transactions, widespread corruption among officials, and the unwillingness of people to have
children. endemic organized crime.

Published as “Economy - overview”

A decade after the implosion of the Soviet Union in 1991, Russia is still struggling to establish a modern market economy and achieve strong economic growth. In contrast to its trading partners in Central Europe - which were able to overcome the initial production declines that accompanied the launch of market reforms within three to five years - Russia saw its economy contract for five years, as the executive and legislature dithered over the implementation of many of the basic foundations of a market economy.

Russia achieved a slight recovery in 1997, but the government's stubborn budget deficits and the country's poor business climate made it vulnerable when the global financial crisis swept through in 1998. The crisis culminated in the August depreciation of the ruble, a debt default by the government, and a sharp deterioration in living standards for most of the population. The economy rebounded in 1999 and 2000, buoyed by the competitive boost from the weak ruble and a surging trade surplus fueled by rising world oil prices.

This recovery, along with a renewed government effort in 2000 to advance lagging structural reforms, have raised business and investor confidence over Russia's prospects in its second decade of transition. Yet serious problems persist. Russia remains heavily dependent on exports of commodities, particularly oil, natural gas, metals, and timber, which account for over 80% of exports, leaving the country vulnerable to swings in world prices.

Russia's agricultural sector remains beset by uncertainty over land ownership rights, which has discouraged needed investment and restructuring. Another threat is negative demographic trends, fueled by low birth rates and a deteriorating health situation - including an alarming rise in AIDS cases - that have contributed to a nearly 2% drop in the population since 1992. Russia's industrial base is increasingly dilapidated and must be replaced or modernized if the country is to achieve sustainable economic growth. Other problems include widespread corruption, capital flight, and brain drain.

Rewritten: too little of the 2000 text remains to mark the changes.
A decade after the implosion of the Soviet Union in 1991, Russia is still struggling to establish a modern market economy and achieve strong economic growth. In contrast to its trading partners in Central Europe - which were able to overcome the initial production declines that accompanied the launch of market reforms within three to five years - Russia saw its economy contract for five years, as the executive and legislature dithered over the implementation of many of the basic foundations of a market economy. Russia achieved a slight recovery in 1997, but the government's stubborn budget deficits and the country's poor business climate made it vulnerable when the global financial crisis swept through in 1998. The crisis culminated in the August depreciation of the ruble, a debt default by the government, and a sharp deterioration in living standards for most of the population. The economy rebounded in 1999 and 2000, buoyed by the competitive boost from the weak ruble and a surging trade surplus fueled by rising world oil prices. This recovery, along with a renewed government effort in 2000 to advance lagging structural reforms, have raised business and investor confidence over Russia's prospects in its second decade of transition. Yet serious problems persist. Russia remains heavily dependent on exports of commodities, particularly oil, natural gas, metals, and timber, which account for over 80% of exports, leaving the country vulnerable to swings in world prices. Russia's agricultural sector remains beset by uncertainty over land ownership rights, which has discouraged needed investment and restructuring. Another threat is negative demographic trends, fueled by low birth rates and a deteriorating health situation - including an alarming rise in AIDS cases - that have contributed to a nearly 2% drop in the population since 1992. Russia's industrial base is increasingly dilapidated and must be replaced or modernized if the country is to achieve sustainable economic growth. Other problems include widespread corruption, capital flight, and brain drain.

Published as “Economy - overview”

A decade after the implosion of the centrally planned Soviet Union in December 1991, Russia is still struggling to establish a modern market economy, modernize its industrial base, and maintain strong economic growth. The period 1992-98 was marked by a poor business climate, a deterioration in already threadbare living standards, and failure to institute modern market reforms. Conditions improved markedly in 1999-2002, with annual output growing by an average 6% and with progress in structural reforms.

Yet serious problems persist. Russia remains heavily dependent on exports of commodities, particularly oil, natural gas, metals, and timber, which account for over 80% of exports, leaving the country vulnerable to swings in world prices. Russia's industrial base is increasingly dilapidated and must be replaced or modernized if the country is to maintain strong economic growth. Other problems include widespread corruption, lack of a strong legal system, capital flight, and brain drain.

Rewritten: too little of the 2001 text remains to mark the changes.
A decade after the implosion of the centrally planned Soviet Union in December 1991, Russia is still struggling to establish a modern market economy, modernize its industrial base, and maintain strong economic growth. The period 1992-98 was marked by a poor business climate, a deterioration in already threadbare living standards, and failure to institute modern market reforms. Conditions improved markedly in 1999-2002, with annual output growing by an average 6% and with progress in structural reforms. Yet serious problems persist. Russia remains heavily dependent on exports of commodities, particularly oil, natural gas, metals, and timber, which account for over 80% of exports, leaving the country vulnerable to swings in world prices. Russia's industrial base is increasingly dilapidated and must be replaced or modernized if the country is to maintain strong economic growth. Other problems include widespread corruption, lack of a strong legal system, capital flight, and brain drain.

Published as “Economy - overview”

A decade after the implosion of the Soviet Union in December 1991, Russia is still struggling to establish a modern market economy and achieve strong economic growth. In contrast to its trading partners in Central Europe - which were able within 3 to 5 years to overcome the initial production declines that accompanied the launch of market reforms - Russia saw its economy contract for five years, as the executive and legislature dithered over the implementation of many of the basic foundations of a market economy.

Russia achieved a slight recovery in 1997, but the government's stubborn budget deficits and the country's poor business climate made it vulnerable when the global financial crisis swept through in 1998. The crisis culminated in the August depreciation of the ruble, a debt default by the government, and a sharp deterioration in living standards for most of the population. The economy subsequently has rebounded, growing by an average of more than 6% annually in 1999-2002 on the back of higher oil prices and the 60% depreciation of the ruble in 1998.

These GDP numbers, along with a renewed government effort to advance lagging structural reforms, have raised business and investor confidence over Russia's prospects in its second decade of transition. Yet serious problems persist. Oil, natural gas, metals, and timber account for more than 80% of exports, leaving the country vulnerable to swings in world prices. Russia's industrial base is increasingly dilapidated and must be replaced or modernized if the country is to maintain vigorous economic growth.

Other problems include a weak banking system, a poor business climate that discourages both domestic and foreign investors, corruption, local and regional government intervention in the courts, and widespread lack of trust in institutions. In 2003 President PUTIN further tightened his control over the "oligarchs," especially in the realm of political expression.

Rewritten: too little of the 2002 text remains to mark the changes.
A decade after the implosion of the Soviet Union in December 1991, Russia is still struggling to establish a modern market economy and achieve strong economic growth. In contrast to its trading partners in Central Europe - which were able within 3 to 5 years to overcome the initial production declines that accompanied the launch of market reforms - Russia saw its economy contract for five years, as the executive and legislature dithered over the implementation of many of the basic foundations of a market economy. Russia achieved a slight recovery in 1997, but the government's stubborn budget deficits and the country's poor business climate made it vulnerable when the global financial crisis swept through in 1998. The crisis culminated in the August depreciation of the ruble, a debt default by the government, and a sharp deterioration in living standards for most of the population. The economy subsequently has rebounded, growing by an average of more than 6% annually in 1999-2002 on the back of higher oil prices and the 60% depreciation of the ruble in 1998. These GDP numbers, along with a renewed government effort to advance lagging structural reforms, have raised business and investor confidence over Russia's prospects in its second decade of transition. Yet serious problems persist. Oil, natural gas, metals, and timber account for more than 80% of exports, leaving the country vulnerable to swings in world prices. Russia's industrial base is increasingly dilapidated and must be replaced or modernized if the country is to maintain vigorous economic growth. Other problems include a weak banking system, a poor business climate that discourages both domestic and foreign investors, corruption, local and regional government intervention in the courts, and widespread lack of trust in institutions. In 2003 President PUTIN further tightened his control over the "oligarchs," especially in the realm of political expression.

Published as “Economy - overview”

Russia ended 2003 with its fifth straight year of growth, averaging 6.5% annually since the financial crisis of 1998. Although high oil prices and a relatively cheap ruble are important drivers of this economic rebound, since 2000 investment and consumer-driven demand have played a noticeably increasing role. Real fixed capital investments have averaged gains greater than 10% over the last four years and real personal incomes have averaged increases over 12%. Russia has also improved its international financial position since the 1998 financial crisis, with its foreign debt declining from 90% of GDP to around 28%. Strong oil export earnings have allowed Russia to increase its foreign reserves from only $12 billion to some $80 billion.

These achievements, along with a renewed government effort to advance structural reforms, have raised business and investor confidence in Russia's economic prospects. Nevertheless, serious problems persist. Oil, natural gas, metals, and timber account for more than 80% of exports, leaving the country vulnerable to swings in world prices. Russia's manufacturing base is dilapidated and must be replaced or modernized if the country is to achieve broad-based economic growth.

Other problems include a weak banking system, a poor business climate that discourages both domestic and foreign investors, corruption, local and regional government intervention in the courts, and widespread lack of trust in institutions. In addition, a string of investigations launched against a major Russian oil company, culminating with the arrest of its CEO in the fall of 2003, have raised concerns by some observers that President PUTIN is granting more influence to forces within his government that desire to reassert state control over the economy.

~~A decade after the implosion of the Soviet Union in December 1991,~~ Russia is still struggling to establish a modern market economy and achieve strong economic growth. In contrast to its trading partners in Central Europe - which were able within 3 to 5 years to overcome the initial production declines that accompanied the launch of market reforms - Russia saw ended 2003 with its ~~economy contract for five years, as the executive and legislature dithered over the implementation of many of the basic foundations~~ fifth straight year of ~~a market economy. Russia achieved a slight recovery in 1997, but the government's stubborn budget deficits and the country's poor business climate made it vulnerable when~~ growth, averaging 6.5% annually since the ~~global~~ financial crisis ~~swept through in 1998. The crisis culminated in the August depreciation~~ of ~~the ruble, a debt default by the government,~~ 1998. Although high oil prices and a ~~sharp deterioration in living standards for most of the population. The economy subsequently has rebounded, growing by an average~~ relatively cheap ruble are important drivers of ~~more~~ this economic rebound, since 2000 investment and consumer-driven demand have played a noticeably increasing role. Real fixed capital investments have averaged gains greater than ~~6% annually in 1999-2002 on~~ 10% over the ~~back of higher oil prices~~ last four years and real personal incomes have averaged increases over 12%. Russia has also improved its international financial position since the ~~60% depreciation~~ 1998 financial crisis, with its foreign debt declining from 90% of ~~the ruble in 1998. These~~ GDP ~~numbers,~~ to around 28%. Strong oil export earnings have allowed Russia to increase its foreign reserves from only $12 billion to some $80 billion. These achievements, along with a renewed government effort to advance ~~lagging~~ structural reforms, have raised business and investor confidence ~~over Russia's prospects~~ in ~~its second decade of transition. Yet~~ Russia's economic prospects. Nevertheless, serious problems persist. Oil, natural gas, metals, and timber account for more than 80% of exports, leaving the country vulnerable to swings in world prices. Russia's ~~industrial~~ manufacturing base is ~~increasingly~~ dilapidated and must be replaced or modernized if the country is to ~~maintain vigorous~~ achieve broad-based economic growth. Other problems include a weak banking system, a poor business climate that discourages both domestic and foreign investors, corruption, local and regional government intervention in the courts, and widespread lack of trust in institutions. In ~~2003~~ addition, a string of investigations launched against a major Russian oil company, culminating with the arrest of its CEO in the fall of 2003, have raised concerns by some observers that President PUTIN ~~further tightened~~ is granting more influence to forces within his government that desire to reassert state control over the ~~"oligarchs," especially in the realm of political expression.~~ economy.

Published as “Economy - overview”

Russia ended 2004 with its sixth straight year of growth, averaging 6.5% annually since the financial crisis of 1998. Although high oil prices and a relatively cheap ruble are important drivers of this economic rebound, since 2000 investment and consumer-driven demand have played a noticeably increasing role. Real fixed capital investments have averaged gains greater than 10% over the last five years, and real personal incomes have realized average increases over 12%. Russia has also improved its international financial position since the 1998 financial crisis, with its foreign debt declining from 90% of GDP to around 28%. Strong oil export earnings have allowed Russia to increase its foreign reserves from only $12 billion to some $120 billion at yearend 2004.

These achievements, along with a renewed government effort to advance structural reforms, have raised business and investor confidence in Russia's economic prospects. Nevertheless, serious problems persist. Economic growth slowed down in the second half of 2004 and the Russian government forecasts growth of only 4.5% to 6.2% for 2005. Oil, natural gas, metals, and timber account for more than 80% of exports, leaving the country vulnerable to swings in world prices.

Russia's manufacturing base is dilapidated and must be replaced or modernized if the country is to achieve broad-based economic growth. Other problems include a weak banking system, a poor business climate that discourages both domestic and foreign investors, corruption, and widespread lack of trust in institutions. In addition, a string of investigations launched against a major Russian oil company, culminating with the arrest of its CEO in the fall of 2003, have raised concerns by some observers that President PUTIN is granting more influence to forces within his government that desire to reassert state control over the economy.

Russia ended ~~2003~~ 2004 with its ~~fifth~~ sixth straight year of growth, averaging 6.5% annually since the financial crisis of 1998. Although high oil prices and a relatively cheap ruble are important drivers of this economic rebound, since 2000 investment and consumer-driven demand have played a noticeably increasing role. Real fixed capital investments have averaged gains greater than 10% over the last ~~four years~~ five years, and real personal incomes have ~~averaged~~ realized average increases over 12%. Russia has also improved its international financial position since the 1998 financial crisis, with its foreign debt declining from 90% of GDP to around 28%. Strong oil export earnings have allowed Russia to increase its foreign reserves from only $12 billion to some ~~$80 billion.~~ $120 billion at yearend 2004. These achievements, along with a renewed government effort to advance structural reforms, have raised business and investor confidence in Russia's economic prospects. Nevertheless, serious problems persist. Economic growth slowed down in the second half of 2004 and the Russian government forecasts growth of only 4.5% to 6.2% for 2005. Oil, natural gas, metals, and timber account for more than 80% of exports, leaving the country vulnerable to swings in world prices. Russia's manufacturing base is dilapidated and must be replaced or modernized if the country is to achieve broad-based economic growth. Other problems include a weak banking system, a poor business climate that discourages both domestic and foreign investors, corruption, ~~local and regional government intervention in the courts,~~ and widespread lack of trust in institutions. In addition, a string of investigations launched against a major Russian oil company, culminating with the arrest of its CEO in the fall of 2003, have raised concerns by some observers that President PUTIN is granting more influence to forces within his government that desire to reassert state control over the economy.

Published as “Economy - overview”

Russia ended 2005 with its seventh straight year of growth, averaging 6.4% annually since the financial crisis of 1998. Although high oil prices and a relatively cheap ruble are important drivers of this economic rebound, since 2000 investment and consumer-driven demand have played a noticeably increasing role. Real fixed capital investments have averaged gains greater than 10% over the last five years, and real personal incomes have realized average increases over 12%. 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, with its foreign debt declining from 90% of GDP to around 31%. Strong oil export earnings have allowed Russia to increase its foreign reserves from only $12 billion to some $180 billion at yearend 2005. These achievements, along with a renewed government effort to advance structural reforms, have raised business and investor confidence in Russia's economic prospects.

Nevertheless, serious problems persist. Economic growth slowed to 5.9% for 2005 while inflation remains high. Oil, natural gas, metals, and timber account for more than 80% of exports, leaving the country vulnerable to swings in world prices. Russia's manufacturing base is dilapidated and must be replaced or modernized if the country is to achieve broad-based economic growth. Other problems include a weak banking system, a poor business climate that discourages both domestic and foreign investors, corruption, and widespread lack of trust in institutions.

In addition, a string of investigations launched against a major Russian oil company, culminating with the arrest of its CEO in the fall of 2003 and the acquisition of the company by a state owned firm, have raised concerns by some observers that President PUTIN is granting more influence to forces within his government that desire to reassert state control over the economy. State control has increased in the past year with a number of large acquisitions. Most fundamentally, Russia has made little progress in building the rule of law, the bedrock of a modern market economy.

Russia ended ~~2004~~ 2005 with its ~~sixth~~ seventh straight year of growth, averaging ~~6.5%~~ 6.4% annually since the financial crisis of 1998. Although high oil prices and a relatively cheap ruble are important drivers of this economic rebound, since 2000 investment and consumer-driven demand have played a noticeably increasing role. Real fixed capital investments have averaged gains greater than 10% over the last five years, and real personal incomes have realized average increases over 12%. 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, with its foreign debt declining from 90% of GDP to around ~~28%.~~ 31%. Strong oil export earnings have allowed Russia to increase its foreign reserves from only $12 billion to some ~~$120~~ $180 billion at yearend ~~2004.~~ 2005. These achievements, along with a renewed government effort to advance structural reforms, have raised business and investor confidence in Russia's economic prospects. Nevertheless, serious problems persist. Economic growth slowed ~~down in the second half of 2004 and the Russian government forecasts growth of only 4.5%~~ to ~~6.2%~~ 5.9% for ~~2005.~~ 2005 while inflation remains high. Oil, natural gas, metals, and timber account for more than 80% of exports, leaving the country vulnerable to swings in world prices. Russia's manufacturing base is dilapidated and must be replaced or modernized if the country is to achieve broad-based economic growth. Other problems include a weak banking system, a poor business climate that discourages both domestic and foreign investors, corruption, and widespread lack of trust in institutions. In addition, a string of investigations launched against a major Russian oil company, culminating with the arrest of its CEO in the fall of ~~2003,~~ 2003 and the acquisition of the company by a state owned firm, have raised concerns by some observers that President PUTIN is granting more influence to forces within his government that desire to reassert state control over the economy. State control has increased in the past year with a number of large acquisitions. Most fundamentally, Russia has made little progress in building the rule of law, the bedrock of a modern market economy.

Published as “Economy - overview”

Russia ended 2006 with its eighth straight year of growth, averaging 6.7% 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 five 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 2006 with a surplus of 9% 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 39% 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 $315 billion at yearend 2006, 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 2006.

In 2006, Russia's GDP grew 6.6%, while inflation was below 10% for the first time in the past 10 years. Growth was driven by non-tradable services and goods for the domestic market, as opposed to oil or mineral extraction and exports. 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 32% 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. A 20% appreciation of the ruble over 2005-06 has made attracting additional investment more difficult.

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 ahead of the elections, corruption, and widespread lack of trust in institutions continue to dampen domestic and foreign investor sentiment. From 2002 to 2005, the government bureaucracy increased by 17% - 10.9% in 2005 alone. 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.

Russia ended ~~2005~~ 2006 with its ~~seventh~~ eighth straight year of growth, averaging ~~6.4%~~ 6.7% annually since the financial crisis of 1998. Although high oil prices and a relatively cheap ruble ~~are important drivers of~~ initially drove this ~~economic rebound,~~ growth, since ~~2000 investment and consumer-driven~~ 2003 consumer demand and, more recently, investment have played a ~~noticeably increasing~~ significant role. ~~Real~~ Over the last five years, fixed capital investments have averaged real gains greater than 10% ~~over the last five years,~~ per year and ~~real~~ personal incomes have ~~realized average increases over 12%.~~ 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,~~ crisis. The federal budget has run surpluses since 2001 and ended 2006 with a surplus of 9% of GDP. Over the past several years, Russia has used its ~~foreign~~ stabilization fund based on oil taxes to prepay all Soviet-era sovereign debt ~~declining from 90%~~ to Paris Club creditors and the IMF. Foreign debt has decreased to 39% of ~~GDP~~ GDP, mainly due to ~~around 31%. Strong oil~~ decreasing state debt, although commercial debt to foreigners has risen strongly. Oil export earnings have allowed Russia to increase its foreign reserves from ~~only~~ $12 billion in 1999 to some ~~$180~~ $315 billion at yearend ~~2005. These achievements, along with~~ 2006, the third largest reserves in the world. During PUTIN's first administration, a ~~renewed government effort to advance structural reforms,~~ 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. Nevertheless, serious problems persist. Economic growth slowed to 5.9% for~~ prospects, with foreign direct investment rising from $14.6 billion in 2005 to an estimated $30 billion in 2006. In 2006, Russia's GDP grew 6.6%, while inflation ~~remains high.~~ was below 10% for the first time in the past 10 years. Growth was driven by non-tradable services and goods for the domestic market, as opposed to oil or mineral extraction and exports. 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,~~ exports and 32% 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. ~~Other problems include a weak~~ A 20% appreciation of the ruble over 2005-06 has made attracting additional investment more difficult. The banking system, ~~a poor business climate that discourages both domestic~~ while increasing consumer lending and ~~foreign investors,~~ growing at a high rate, is still small relative to the banking sectors of Russia's emerging market peers. Political uncertainties ahead of the elections, corruption, and widespread lack of trust in ~~institutions. In addition, a string of investigations launched against a major Russian oil company, culminating with the arrest of its CEO in the fall of 2003~~ institutions continue to dampen domestic and ~~the acquisition of~~ foreign investor sentiment. From 2002 to 2005, the ~~company by a state owned firm, have raised concerns~~ government bureaucracy increased by ~~some observers that~~ 17% - 10.9% in 2005 alone. President PUTIN ~~is granting~~ has granted more influence to forces within his government that desire to reassert state control over the economy. ~~State control has increased in the past year with a number of large acquisitions. Most fundamentally,~~ 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.

Published as “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.

Russia ended ~~2006~~ 2007 with its ~~eighth~~ ninth straight year of growth, averaging ~~6.7%~~ 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 ~~five~~ 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 ~~2006~~ 2007 with a surplus of 9% 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 ~~has decreased to 39%~~ is approximately one-third of ~~GDP, mainly due to decreasing~~ GDP. The state ~~debt, although~~ 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 ~~$315~~ $470 billion at yearend ~~2006,~~ 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 ~~an estimated $30~~ approximately $45 billion in ~~2006.~~ 2007. In ~~2006,~~ 2007, Russia's GDP grew ~~6.6%, while inflation was below 10% for the first time in the past 10 years. Growth was driven~~ 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 ~~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 ~~32%~~ 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. ~~A 20% appreciation of the ruble over 2005-06 has made attracting additional investment more difficult.~~ 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 ~~ahead of the elections,~~ associated with this year's power transition, corruption, and ~~widespread~~ lack of trust in institutions continue to dampen domestic and foreign investor sentiment. ~~From 2002 to 2005, the government bureaucracy increased by 17% - 10.9% in 2005 alone. 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~~ legislative amendments to make its intellectual property protection WTO-consistent, but enforcement remains problematic.

Published as “Economy - overview”

Russia ended 2008 with GDP growth of 5.6%, following 10 straight years of growth averaging 7% annually since the financial crisis of 1998. Over the last six years, fixed capital investment growth and personal income growth have averaged above 10%, but both grew at slower rates in 2008. Growth in 2008 was driven largely by non-tradable services and domestic manufacturing, rather than exports. During the past decade, poverty and unemployment declined steadily and the middle class continued to expand.

Russia also improved its international financial position, running balance of payments surpluses since 2000. Foreign exchange reserves grew from $12 billion in 1999 to almost $600 billion by end July 2008, which include $200 billion in two sovereign wealth funds: a reserve fund to support budgetary expenditures in case of a fall in the price of oil and a national welfare fund to help fund pensions and infrastructure development.

Total foreign debt is almost one-third of GDP. The state component of foreign debt has declined, but commercial short-term debt to foreigners has risen strongly. These positive trends began to reverse in the second half of 2008. Investor concerns over the Russia-Georgia conflict, corporate governance issues, and the global credit crunch in September caused the Russian stock market to fall by roughly 70%, primarily due to margin calls that were difficult for many Russian companies to meet.

The global crisis also affected Russia's banking system, which faced liquidity problems. Moscow responded quickly in early October 2008, initiating a rescue plan of over $200 billion that was designed to increase liquidity in the financial sector, to help firms refinance foreign debt, and to support the stock market. The government also unveiled a $20 billion tax cut plan and other safety nets for society and industry.

Meanwhile, a 70% drop in the price of oil since mid-July further exacerbated imbalances in external accounts and the federal budget. In mid-November, mini-devaluations of the currency by the Central Bank caused increased capital flight and froze domestic credit markets, resulting in growing unemployment, wage arrears, and a severe drop in production. Foreign exchange reserves dropped to around $435 billion by end 2008, as the Central Bank defended an overvalued ruble.

In the first year of his term, President MEDVEDEV outlined a number of economic priorities for Russia including improving infrastructure, innovation, investment, and institutions; reducing the state's role in the economy; reforming the tax system and banking sector; developing one of the biggest financial centers in the world, combating corruption, and improving the judiciary. The Russian government needs to diversify the economy further, as energy and other raw materials still dominate Russian export earnings and federal budget receipts.

Russia's infrastructure requires large investments and must be replaced or modernized if the country is to achieve broad-based economic growth. Corruption, lack of trust in institutions, and more recently, exchange rate uncertainty and the global economic crisis continue to dampen domestic and foreign investor sentiment. Russia has made some progress in building the rule of law, the bedrock of a modern market economy, but much work remains on judicial reform.

Moscow continues to seek accession to the WTO and has made some progress, but its timeline for entry into the organization continues to slip, and the negotiating atmosphere has soured in the wake of the Georgia and global economic crises.

Rewritten: too little of the 2008 text remains to mark the changes.
Russia ended 2008 with GDP growth of 5.6%, following 10 straight years of growth averaging 7% annually since the financial crisis of 1998. Over the last six years, fixed capital investment growth and personal income growth have averaged above 10%, but both grew at slower rates in 2008. Growth in 2008 was driven largely by non-tradable services and domestic manufacturing, rather than exports. During the past decade, poverty and unemployment declined steadily and the middle class continued to expand. Russia also improved its international financial position, running balance of payments surpluses since 2000. Foreign exchange reserves grew from $12 billion in 1999 to almost $600 billion by end July 2008, which include $200 billion in two sovereign wealth funds: a reserve fund to support budgetary expenditures in case of a fall in the price of oil and a national welfare fund to help fund pensions and infrastructure development. Total foreign debt is almost one-third of GDP. The state component of foreign debt has declined, but commercial short-term debt to foreigners has risen strongly. These positive trends began to reverse in the second half of 2008. Investor concerns over the Russia-Georgia conflict, corporate governance issues, and the global credit crunch in September caused the Russian stock market to fall by roughly 70%, primarily due to margin calls that were difficult for many Russian companies to meet. The global crisis also affected Russia's banking system, which faced liquidity problems. Moscow responded quickly in early October 2008, initiating a rescue plan of over $200 billion that was designed to increase liquidity in the financial sector, to help firms refinance foreign debt, and to support the stock market. The government also unveiled a $20 billion tax cut plan and other safety nets for society and industry. Meanwhile, a 70% drop in the price of oil since mid-July further exacerbated imbalances in external accounts and the federal budget. In mid-November, mini-devaluations of the currency by the Central Bank caused increased capital flight and froze domestic credit markets, resulting in growing unemployment, wage arrears, and a severe drop in production. Foreign exchange reserves dropped to around $435 billion by end 2008, as the Central Bank defended an overvalued ruble. In the first year of his term, President MEDVEDEV outlined a number of economic priorities for Russia including improving infrastructure, innovation, investment, and institutions; reducing the state's role in the economy; reforming the tax system and banking sector; developing one of the biggest financial centers in the world, combating corruption, and improving the judiciary. The Russian government needs to diversify the economy further, as energy and other raw materials still dominate Russian export earnings and federal budget receipts. Russia's infrastructure requires large investments and must be replaced or modernized if the country is to achieve broad-based economic growth. Corruption, lack of trust in institutions, and more recently, exchange rate uncertainty and the global economic crisis continue to dampen domestic and foreign investor sentiment. Russia has made some progress in building the rule of law, the bedrock of a modern market economy, but much work remains on judicial reform. Moscow continues to seek accession to the WTO and has made some progress, but its timeline for entry into the organization continues to slip, and the negotiating atmosphere has soured in the wake of the Georgia and global economic crises.

Published as “Economy - overview”

Russia has undergone significant changes since the collapse of the Soviet Union, moving from a globally-isolated, centrally-planned economy to a more market-based and globally-integrated economy. Economic reforms in the 1990s privatized most industry, with notable exceptions in the energy and defense-related sectors. The protection of property rights is still weak and the private sector remains subject to heavy state interference.

Russian industry is primarily split between globally-competitive commodity producers - in 2009 Russia was the world's largest exporter of natural gas, the second largest exporter of oil, and the third largest exporter of steel and primary aluminum - and other less competitive heavy industries that remain dependent on the Russian domestic market. This reliance on commodity exports makes Russia vulnerable to boom and bust cycles that follow the highly volatile swings in global commodity prices.

The government since 2007 has embarked on an ambitious program to reduce this dependency and build up the country's high technology sectors, but with few results so far. The economy had averaged 7% growth since the 1998 Russian financial crisis, resulting in a doubling of real disposable incomes and the emergence of a middle class. The Russian economy, however, was one of the hardest hit by the 2008-09 global economic crisis as oil prices plummeted and the foreign credits that Russian banks and firms relied on dried up.

The Central Bank of Russia spent one-third of its $600 billion international reserves, the world's third largest, in late 2008 to slow the devaluation of the ruble. The government also devoted $200 billion in a rescue plan to increase liquidity in the banking sector and aid Russian firms unable to roll over large foreign debts coming due. The economic decline bottomed out in mid-2009 and the economy began to grow in the first quarter of 2010.

However, a severe drought and fires in central Russia reduced agricultural output, prompting a ban on grain exports for part of the year, and slowed growth in other sectors such as manufacturing and retail trade. Russia's long-term challenges include a shrinking workforce, a high level of corruption, difficulty in accessing capital for smaller, non-energy companies, and poor infrastructure in need of large investments.

Rewritten: too little of the 2009 text remains to mark the changes.
Russia has undergone significant changes since the collapse of the Soviet Union, moving from a globally-isolated, centrally-planned economy to a more market-based and globally-integrated economy. Economic reforms in the 1990s privatized most industry, with notable exceptions in the energy and defense-related sectors. The protection of property rights is still weak and the private sector remains subject to heavy state interference. Russian industry is primarily split between globally-competitive commodity producers - in 2009 Russia was the world's largest exporter of natural gas, the second largest exporter of oil, and the third largest exporter of steel and primary aluminum - and other less competitive heavy industries that remain dependent on the Russian domestic market. This reliance on commodity exports makes Russia vulnerable to boom and bust cycles that follow the highly volatile swings in global commodity prices. The government since 2007 has embarked on an ambitious program to reduce this dependency and build up the country's high technology sectors, but with few results so far. The economy had averaged 7% growth since the 1998 Russian financial crisis, resulting in a doubling of real disposable incomes and the emergence of a middle class. The Russian economy, however, was one of the hardest hit by the 2008-09 global economic crisis as oil prices plummeted and the foreign credits that Russian banks and firms relied on dried up. The Central Bank of Russia spent one-third of its $600 billion international reserves, the world's third largest, in late 2008 to slow the devaluation of the ruble. The government also devoted $200 billion in a rescue plan to increase liquidity in the banking sector and aid Russian firms unable to roll over large foreign debts coming due. The economic decline bottomed out in mid-2009 and the economy began to grow in the first quarter of 2010. However, a severe drought and fires in central Russia reduced agricultural output, prompting a ban on grain exports for part of the year, and slowed growth in other sectors such as manufacturing and retail trade. Russia's long-term challenges include a shrinking workforce, a high level of corruption, difficulty in accessing capital for smaller, non-energy companies, and poor infrastructure in need of large investments.

Published as “Economy - overview”

Russia has undergone significant changes since the collapse of the Soviet Union, moving from a globally-isolated, centrally-planned economy to a more market-based and globally-integrated economy. Economic reforms in the 1990s privatized most industry, with notable exceptions in the energy and defense-related sectors. The protection of property rights is still weak and the private sector remains subject to heavy state interference.

Russian industry is primarily split between globally-competitive commodity producers - in 2009 Russia was the world's largest exporter of natural gas, the second largest exporter of oil, and the third largest exporter of steel and primary aluminum - and other less competitive heavy industries that remain dependent on the Russian domestic market. This reliance on commodity exports makes Russia vulnerable to boom and bust cycles that follow the highly volatile swings in global commodity prices.

The government since 2007 has embarked on an ambitious program to reduce this dependency and build up the country's high technology sectors, but with few results so far. The economy had averaged 7% growth since the 1998 Russian financial crisis, resulting in a doubling of real disposable incomes and the emergence of a middle class. The Russian economy, however, was one of the hardest hit by the 2008-09 global economic crisis as oil prices plummeted and the foreign credits that Russian banks and firms relied on dried up.

The Central Bank of Russia spent one-third of its $600 billion international reserves, the world's third largest, in late 2008 to slow the devaluation of the ruble. The government also devoted $200 billion in a rescue plan to increase liquidity in the banking sector and aid Russian firms unable to roll over large foreign debts coming due. The economic decline bottomed out in mid-2009 and the economy began to grow in the first quarter of 2010.

However, a severe drought and fires in central Russia reduced agricultural output, prompting a ban on grain exports for part of the year, and slowed growth in other sectors such as manufacturing and retail trade. High oil prices buoyed Russian growth in the first quarter of 2011 and could help Russia reduce the budget deficit inherited from the lean years of 2008-09, but inflation and increased government expenditures may limit the positive impact of these revenues.

Russia's long-term challenges include a shrinking workforce, a high level of corruption, difficulty in accessing capital for smaller, non-energy companies, and poor infrastructure in need of large investments.

Russia has undergone significant changes since the collapse of the Soviet Union, moving from a globally-isolated, centrally-planned economy to a more market-based and globally-integrated economy. Economic reforms in the 1990s privatized most industry, with notable exceptions in the energy and defense-related sectors. The protection of property rights is still weak and the private sector remains subject to heavy state interference. Russian industry is primarily split between globally-competitive commodity producers - in 2009 Russia was the world's largest exporter of natural gas, the second largest exporter of oil, and the third largest exporter of steel and primary aluminum - and other less competitive heavy industries that remain dependent on the Russian domestic market. This reliance on commodity exports makes Russia vulnerable to boom and bust cycles that follow the highly volatile swings in global commodity prices. The government since 2007 has embarked on an ambitious program to reduce this dependency and build up the country's high technology sectors, but with few results so far. The economy had averaged 7% growth since the 1998 Russian financial crisis, resulting in a doubling of real disposable incomes and the emergence of a middle class. The Russian economy, however, was one of the hardest hit by the 2008-09 global economic crisis as oil prices plummeted and the foreign credits that Russian banks and firms relied on dried up. The Central Bank of Russia spent one-third of its $600 billion international reserves, the world's third largest, in late 2008 to slow the devaluation of the ruble. The government also devoted $200 billion in a rescue plan to increase liquidity in the banking sector and aid Russian firms unable to roll over large foreign debts coming due. The economic decline bottomed out in mid-2009 and the economy began to grow in the first quarter of 2010. However, a severe drought and fires in central Russia reduced agricultural output, prompting a ban on grain exports for part of the year, and slowed growth in other sectors such as manufacturing and retail trade. High oil prices buoyed Russian growth in the first quarter of 2011 and could help Russia reduce the budget deficit inherited from the lean years of 2008-09, but inflation and increased government expenditures may limit the positive impact of these revenues. Russia's long-term challenges include a shrinking workforce, a high level of corruption, difficulty in accessing capital for smaller, non-energy companies, and poor infrastructure in need of large investments.

Published as “Economy - overview”

Russia has undergone significant changes since the collapse of the Soviet Union, moving from a globally-isolated, centrally-planned economy to a more market-based and globally-integrated economy. Economic reforms in the 1990s privatized most industry, with notable exceptions in the energy and defense-related sectors. The protection of property rights is still weak and the private sector remains subject to heavy state interference.

Russian industry is primarily split between globally-competitive commodity producers. In 2011, Russia became the world's leading oil producer, surpassing Saudi Arabia; Russia is the second-largest producer of natural gas; Russia holds the world's largest natural gas reserves, the second-largest coal reserves, and the eighth-largest crude oil reserves. Russia is also a top exporter of metals such as steel and primary aluminum.

Russia's reliance on commodity exports makes it vulnerable to boom and bust cycles that follow the volatile swings in global prices. The government since 2007 has embarked on an ambitious program to reduce this dependency and build up the country's high technology sectors, but with few results so far. The economy had averaged 7% growth in the decade following the 1998 Russian financial crisis, resulting in a doubling of real disposable incomes and the emergence of a middle class.

The Russian economy, however, was one of the hardest hit by the 2008-09 global economic crisis as oil prices plummeted and the foreign credits that Russian banks and firms relied on dried up. According to the World Bank the government's anti-crisis package in 2008-09 amounted to roughly 6.7% of GDP. The economic decline bottomed out in mid-2009 and the economy began to grow in the third quarter of 2009. High oil prices buoyed Russian growth in 2011-12 and helped Russia reduce the budget deficit inherited from 2008-09.

Russia has reduced unemployment to a record low and has lowered inflation below double digit rates. Russia joined the World Trade Organization in 2012, which will reduce trade barriers and help open foreign markets for Russian goods. At the same time, Russia has sought to cement economic ties with countries in the former Soviet space through a Customs Union with Belarus and Kazakhstan, and, in the next several years, through a new Russia-led economic bloc called the Eurasian Union.

Russia has had difficulty attracting captial and has suffered large capital outflows in the past several years, leading to official programs to improve Russia's international rankings for its investment climate. Russia's long-term challenges also include a shrinking workforce, intractable large- and small-scale corruption, and underinvestment in infrastructure.

Russia has undergone significant changes since the collapse of the Soviet Union, moving from a globally-isolated, centrally-planned economy to a more market-based and globally-integrated economy. Economic reforms in the 1990s privatized most industry, with notable exceptions in the energy and defense-related sectors. The protection of property rights is still weak and the private sector remains subject to heavy state interference. Russian industry is primarily split between globally-competitive commodity ~~producers - in 2009~~ producers. In 2011, Russia ~~was~~ became the world's ~~largest exporter~~ leading oil producer, surpassing Saudi Arabia; Russia is the second-largest producer of natural ~~gas,~~ gas; Russia holds the ~~second~~ world's largest ~~exporter of oil,~~ natural gas reserves, the second-largest coal reserves, and the ~~third largest~~ eighth-largest crude oil reserves. Russia is also a top exporter of metals such as steel and primary ~~aluminum - and other less competitive heavy industries that remain dependent on the Russian domestic market. This~~ aluminum. Russia's reliance on commodity exports makes ~~Russia~~ it vulnerable to boom and bust cycles that follow the ~~highly~~ volatile swings in global ~~commodity~~ prices. The government since 2007 has embarked on an ambitious program to reduce this dependency and build up the country's high technology sectors, but with few results so far. The economy had averaged 7% growth ~~since~~ in the decade following the 1998 Russian financial crisis, resulting in a doubling of real disposable incomes and the emergence of a middle class. The Russian economy, however, was one of the hardest hit by the 2008-09 global economic crisis as oil prices plummeted and the foreign credits that Russian banks and firms relied on dried up. ~~The Central Bank of Russia spent one-third of its $600 billion international reserves, the world's third largest, in late 2008~~ According to ~~slow~~ the ~~devaluation of~~ World Bank the ~~ruble. The government also devoted $200 billion in a rescue plan to increase liquidity~~ government's anti-crisis package in ~~the banking sector and aid Russian firms unable~~ 2008-09 amounted to ~~roll over large foreign debts coming due.~~ roughly 6.7% of GDP. The economic decline bottomed out in mid-2009 and the economy began to grow in the ~~first~~ third quarter of 2010. However, a severe drought and fires in central Russia reduced agricultural output, prompting a ban on grain exports for part of the year, and slowed growth in other sectors such as manufacturing and retail trade. 2009. High oil prices buoyed Russian growth in ~~the first quarter of 2011~~ 2011-12 and ~~could help~~ helped Russia reduce the budget deficit inherited from ~~the lean years of 2008-09, but~~ 2008-09. Russia has reduced unemployment to a record low and has lowered inflation below double digit rates. Russia joined the World Trade Organization in 2012, which will reduce trade barriers and ~~increased government expenditures may limit~~ help open foreign markets for Russian goods. At the ~~positive impact of these revenues.~~ same time, Russia has sought to cement economic ties with countries in the former Soviet space through a Customs Union with Belarus and Kazakhstan, and, in the next several years, through a new Russia-led economic bloc called the Eurasian Union. Russia has had difficulty attracting captial and has suffered large capital outflows in the past several years, leading to official programs to improve Russia's international rankings for its investment climate. Russia's long-term challenges also include a shrinking workforce, ~~a high level of~~ intractable large- and small-scale corruption, ~~difficulty in accessing capital for smaller, non-energy companies,~~ and ~~poor infrastructure~~ underinvestment in ~~need of large investments.~~ infrastructure.

Published as “Economy - overview”

Russia has undergone significant changes since the collapse of the Soviet Union, moving from a globally-isolated, centrally-planned economy to a more market-based and globally-integrated economy. Economic reforms in the 1990s privatized most industry, with notable exceptions in the energy and defense-related sectors. The protection of property rights is still weak and the private sector remains subject to heavy state interference.

In 2011, Russia became the world's leading oil producer, surpassing Saudi Arabia; Russia is the second-largest producer of natural gas; Russia holds the world's largest natural gas reserves, the second-largest coal reserves, and the eighth-largest crude oil reserves. Russia is also a top exporter of metals such as steel and primary aluminum. Russia's reliance on commodity exports makes it vulnerable to boom and bust cycles that follow the volatile swings in global prices.

The government since 2007 has embarked on an ambitious program to reduce this dependency and build up the country's high technology sectors, but with few visible results so far. The economy had averaged 7% growth in the decade following the 1998 Russian financial crisis, resulting in a doubling of real disposable incomes and the emergence of a middle class. The Russian economy, however, was one of the hardest hit by the 2008-09 global economic crisis as oil prices plummeted and the foreign credits that Russian banks and firms relied on dried up.

According to the World Bank the government's anti-crisis package in 2008-09 amounted to roughly 6.7% of GDP. The economic decline bottomed out in mid-2009 and the economy began to grow again in the third quarter of 2009. High oil prices buoyed Russian growth in 2011-12 and helped Russia reduce the budget deficit inherited from 2008-09. Russia has reduced unemployment to a record low and has lowered inflation below double digit rates.

Russia joined the World Trade Organization in 2012, which will reduce trade barriers in Russia for foreign goods and services and help open foreign markets to Russian goods and services. At the same time, Russia has sought to cement economic ties with countries in the former Soviet space through a Customs Union with Belarus and Kazakhstan, and, in the next several years, through the creation of a new Russia-led economic bloc called the Eurasian Economic Union.

Russia has had difficulty attracting foreign direct investment and has experienced large capital outflows in the past several years, leading to official programs to improve Russia's international rankings for its investment climate. Russia's adoption of a new oil-price-based fiscal rule in 2012 and a more flexible exchange rate policy have improved its ability to deal with external shocks, including volatile oil prices. Russia's long-term challenges also include a shrinking workforce, rampant corruption, and underinvestment in infrastructure.

Russia has undergone significant changes since the collapse of the Soviet Union, moving from a globally-isolated, centrally-planned economy to a more market-based and globally-integrated economy. Economic reforms in the 1990s privatized most industry, with notable exceptions in the energy and defense-related sectors. The protection of property rights is still weak and the private sector remains subject to heavy state interference. ~~Russian industry is primarily split between globally-competitive commodity producers.~~ In 2011, Russia became the world's leading oil producer, surpassing Saudi Arabia; Russia is the second-largest producer of natural gas; Russia holds the world's largest natural gas reserves, the second-largest coal reserves, and the eighth-largest crude oil reserves. Russia is also a top exporter of metals such as steel and primary aluminum. Russia's reliance on commodity exports makes it vulnerable to boom and bust cycles that follow the volatile swings in global prices. The government since 2007 has embarked on an ambitious program to reduce this dependency and build up the country's high technology sectors, but with few visible results so far. The economy had averaged 7% growth in the decade following the 1998 Russian financial crisis, resulting in a doubling of real disposable incomes and the emergence of a middle class. The Russian economy, however, was one of the hardest hit by the 2008-09 global economic crisis as oil prices plummeted and the foreign credits that Russian banks and firms relied on dried up. According to the World Bank the government's anti-crisis package in 2008-09 amounted to roughly 6.7% of GDP. The economic decline bottomed out in mid-2009 and the economy began to grow again in the third quarter of 2009. High oil prices buoyed Russian growth in 2011-12 and helped Russia reduce the budget deficit inherited from 2008-09. Russia has reduced unemployment to a record low and has lowered inflation below double digit rates. Russia joined the World Trade Organization in 2012, which will reduce trade barriers in Russia for foreign goods and services and help open foreign markets ~~for~~ to Russian ~~goods.~~ goods and services. At the same time, Russia has sought to cement economic ties with countries in the former Soviet space through a Customs Union with Belarus and Kazakhstan, and, in the next several years, through the creation of a new Russia-led economic bloc called the Eurasian Economic Union. Russia has had difficulty attracting ~~captial~~ foreign direct investment and has ~~suffered~~ experienced large capital outflows in the past several years, leading to official programs to improve Russia's international rankings for its investment climate. Russia's adoption of a new oil-price-based fiscal rule in 2012 and a more flexible exchange rate policy have improved its ability to deal with external shocks, including volatile oil prices. Russia's long-term challenges also include a shrinking workforce, ~~intractable large- and small-scale~~ rampant corruption, and underinvestment in infrastructure.

Published as “Economy - overview”

Russia has undergone significant changes since the collapse of the Soviet Union, moving from a globally-isolated, centrally-planned economy towards a more market-based and globally-integrated economy, but stalling as a partially reformed, statist economy with a high concentration of wealth in officials' hands. Economic reforms in the 1990s privatized most industry, with notable exceptions in the energy and defense-related sectors.

The protection of property rights is still weak and the private sector remains subject to heavy state interference. Russia is one of the world's leading producers of oil and natural gas and is also a top exporter of metals such as steel and primary aluminum. Russia's manufacturing sector is generally uncompetitive on world markets and is geared toward domestic consumption. Russia's reliance on commodity exports makes it vulnerable to boom and bust cycles that follow the volatile swings in global prices.

The economy, which had averaged 7% growth during 1998-2008 as oil prices rose rapidly, was one of the hardest hit by the 2008-09 global economic crisis as oil prices plummeted and the foreign credits that Russian banks and firms relied on dried up. Slowly declining oil prices over the past few years and difficulty attracting foreign direct investment have contributed to a noticeable slowdown in GDP growth rates. In late 2013, the Russian Economic Development Ministry reduced its growth forecast through 2030 to an average of only 2.5% per year, down from its previous forecast of 4.0 to 4.2%. In 2014, following Russia's military intervention in Ukraine, prospects for economic growth declined further, with expections that GDP growth could drop as low as zero.

Rewritten: too little of the 2013 text remains to mark the changes.
Russia has undergone significant changes since the collapse of the Soviet Union, moving from a globally-isolated, centrally-planned economy towards a more market-based and globally-integrated economy, but stalling as a partially reformed, statist economy with a high concentration of wealth in officials' hands. Economic reforms in the 1990s privatized most industry, with notable exceptions in the energy and defense-related sectors. The protection of property rights is still weak and the private sector remains subject to heavy state interference. Russia is one of the world's leading producers of oil and natural gas and is also a top exporter of metals such as steel and primary aluminum. Russia's manufacturing sector is generally uncompetitive on world markets and is geared toward domestic consumption. Russia's reliance on commodity exports makes it vulnerable to boom and bust cycles that follow the volatile swings in global prices. The economy, which had averaged 7% growth during 1998-2008 as oil prices rose rapidly, was one of the hardest hit by the 2008-09 global economic crisis as oil prices plummeted and the foreign credits that Russian banks and firms relied on dried up. Slowly declining oil prices over the past few years and difficulty attracting foreign direct investment have contributed to a noticeable slowdown in GDP growth rates. In late 2013, the Russian Economic Development Ministry reduced its growth forecast through 2030 to an average of only 2.5% per year, down from its previous forecast of 4.0 to 4.2%. In 2014, following Russia's military intervention in Ukraine, prospects for economic growth declined further, with expections that GDP growth could drop as low as zero.

Published as “Economy - overview”

Russia has undergone significant changes since the collapse of the Soviet Union, moving from a globally-isolated, centrally-planned economy towards a more market-based and globally-integrated economy, but stalling as a partially reformed, statist economy with a high concentration of wealth in officials' hands. Economic reforms in the 1990s privatized most industry, with notable exceptions in the energy and defense-related sectors.

The protection of property rights is still weak and the private sector remains subject to heavy state interference. Russia is one of the world's leading producers of oil and natural gas, and is also a top exporter of metals such as steel and primary aluminum. Russia's manufacturing sector is generally uncompetitive on world markets and is geared toward domestic consumption. Russia's reliance on commodity exports makes it vulnerable to boom and bust cycles that follow the volatile swings in global prices.

The economy, which had averaged 7% growth during 1998-2008 as oil prices rose rapidly, was one of the hardest hit by the 2008-09 global economic crisis as oil prices plummeted and the foreign credits that Russian banks and firms relied on dried up. In 2014, economic growth declined further when Russia forcibly violated Ukraine’s sovereignty and territorial integrity, and interfered in Ukraine’s internal affairs. In the second half of 2014, the Russian ruble lost about half of its value, contributing to increased capital outflows that reached $151.5 billion for the year; the ruble remains volatile.

Declining oil prices, lack of economic reforms, and the imposition of foreign sanctions have contributed to the downturn and created wide expectations the economy will continue to slump. In April 2015, the Russian Ministry of Economic Development predicted that the Russia’s economy will contract by 3% in 2015, and average only 2.5% growth through 2030.

Russia has undergone significant changes since the collapse of the Soviet Union, moving from a globally-isolated, centrally-planned economy towards a more market-based and globally-integrated economy, but stalling as a partially reformed, statist economy with a high concentration of wealth in officials' hands. Economic reforms in the 1990s privatized most industry, with notable exceptions in the energy and defense-related sectors. The protection of property rights is still weak and the private sector remains subject to heavy state interference. Russia is one of the world's leading producers of oil and natural ~~gas~~ gas, and is also a top exporter of metals such as steel and primary aluminum. Russia's manufacturing sector is generally uncompetitive on world markets and is geared toward domestic consumption. Russia's reliance on commodity exports makes it vulnerable to boom and bust cycles that follow the volatile swings in global prices. The economy, which had averaged 7% growth during 1998-2008 as oil prices rose rapidly, was one of the hardest hit by the 2008-09 global economic crisis as oil prices plummeted and the foreign credits that Russian banks and firms relied on dried up. ~~Slowly declining oil prices over~~ In 2014, economic growth declined further when Russia forcibly violated Ukraine’s sovereignty and territorial integrity, and interfered in Ukraine’s internal affairs. In the ~~past few years~~ second half of 2014, the Russian ruble lost about half of its value, contributing to increased capital outflows that reached $151.5 billion for the year; the ruble remains volatile. Declining oil prices, lack of economic reforms, and ~~difficulty attracting~~ the imposition of foreign ~~direct investment~~ sanctions have contributed to ~~a noticeable slowdown in GDP growth rates.~~ the downturn and created wide expectations the economy will continue to slump. In ~~late 2013,~~ April 2015, the Russian Ministry of Economic Development ~~Ministry reduced its growth forecast through 2030 to an~~ predicted that the Russia’s economy will contract by 3% in 2015, and average of only 2.5% ~~per year, down from its previous forecast of 4.0 to 4.2%. In 2014, following Russia's military intervention in Ukraine, prospects for economic~~ growth ~~declined further, with expections that GDP growth could drop as low as zero.~~ through 2030.

Published as “Economy - overview”

Russia has undergone significant changes since the collapse of the Soviet Union, moving from a centrally planned economy towards a more market-based system. Both economic growth and reform have stalled in recent years, however, and Russia remains a predominantly statist economy with a high concentration of wealth in officials' hands. Economic reforms in the 1990s privatized most industry, with notable exceptions in the energy, transportation, banking, and defense-related sectors. The protection of property rights is still weak, and the state continues to interfere in the free operation of the private sector.

Russia is one of the world's leading producers of oil and natural gas, and is also a top exporter of metals such as steel and primary aluminum. Russia's reliance on commodity exports makes it vulnerable to boom and bust cycles that follow the volatile swings in global prices.

The economy, which had averaged 7% growth during 1998-2008 as oil prices rose rapidly, has seen diminishing growth rates since then due to the exhaustion of Russia’s commodity-based growth model.

A combination of falling oil prices, international sanctions, and structural limitations pushed Russia into a deep recession in 2015, with the GDP falling by close to 4%. Most economists expect this downturn will continue through 2016. Government support for import substitution has increased recently in an effort to diversify the economy away from extractive industries. Although the Russian Ministry of Economic Development is forecasting a modest growth of 0.7% for 2016 as a whole, the Central Bank of Russia (CBR) is more pessimistic and expects the recovery to begin later in the year and a decline of 0.5% to 1.0% for the full year.

Russia is heavily dependent on the movement of world commodity prices and the CBR estimates that if oil prices remain below $40 per barrel beyond 2016, the resulting shock would cause GDP to fall by up to 5%.

Russia has undergone significant changes since the collapse of the Soviet Union, moving from a ~~globally-isolated, centrally-planned~~ centrally planned economy towards a more market-based system. Both economic growth and ~~globally-integrated economy, but stalling as~~ reform have stalled in recent years, however, and Russia remains a ~~partially reformed,~~ predominantly statist economy with a high concentration of wealth in officials' hands. Economic reforms in the 1990s privatized most industry, with notable exceptions in the ~~energy~~ energy, transportation, banking, and defense-related sectors. The protection of property rights is still ~~weak~~ weak, and the ~~private sector remains subject to heavy~~ state ~~interference.~~ continues to interfere in the free operation of the private sector.
Russia is one of the world's leading producers of oil and natural gas, and is also a top exporter of metals such as steel and primary aluminum. Russia's ~~manufacturing sector is generally uncompetitive on world markets and is geared toward domestic consumption. Russia's~~ reliance on commodity exports makes it vulnerable to boom and bust cycles that follow the volatile swings in global prices.
The economy, which had averaged 7% growth during 1998-2008 as oil prices rose rapidly, ~~was one of the hardest hit by~~ has seen diminishing growth rates since then due to the ~~2008-09 global economic crisis as~~ exhaustion of Russia’s commodity-based growth model.
A combination of falling oil ~~prices plummeted and the foreign credits that Russian banks~~ prices, international sanctions, and ~~firms relied on dried up. In 2014, economic growth declined further when~~ structural limitations pushed Russia ~~forcibly violated Ukraine’s sovereignty and territorial integrity, and interfered~~ into a deep recession in ~~Ukraine’s internal affairs. In~~ 2015, with the ~~second half of 2014,~~ GDP falling by close to 4%. Most economists expect this downturn will continue through 2016. Government support for import substitution has increased recently in an effort to diversify the economy away from extractive industries. Although the Russian ~~ruble lost about half~~ Ministry of ~~its value, contributing to increased capital outflows that reached $151.5 billion~~ Economic Development is forecasting a modest growth of 0.7% for ~~the year;~~ 2016 as a whole, the ~~ruble remains volatile. Declining oil prices, lack~~ Central Bank of ~~economic reforms,~~ Russia (CBR) is more pessimistic and expects the ~~imposition of foreign sanctions have contributed~~ recovery to begin later in the ~~downturn~~ year and ~~created wide expectations the economy will continue~~ a decline of 0.5% to ~~slump. In April 2015,~~ 1.0% for the ~~Russian Ministry~~ full year. Russia is heavily dependent on the movement of ~~Economic Development predicted~~ world commodity prices and the CBR estimates that if oil prices remain below $40 per barrel beyond 2016, the ~~Russia’s economy will contract~~ resulting shock would cause GDP to fall by ~~3% in 2015, and average only 2.5% growth through 2030.~~ up to 5%.

Published as “Economy - overview”

Russia has undergone significant changes since the collapse of the Soviet Union, moving from a centrally planned economy towards a more market-based system. Both economic growth and reform have stalled in recent years, however, and Russia remains a predominantly statist economy with a high concentration of wealth in officials' hands. Economic reforms in the 1990s privatized most industry, with notable exceptions in the energy, transportation, banking, and defense-related sectors. The protection of property rights is still weak, and the state continues to interfere in the free operation of the private sector.

Russia is one of the world's leading producers of oil and natural gas, and is also a top exporter of metals such as steel and primary aluminum. Russia's reliance on commodity exports makes it vulnerable to boom and bust cycles that follow the volatile swings in global prices. The economy, which had averaged 7% growth during the 1998-2008 period as oil prices rose rapidly, has seen diminishing growth rates since then due to the exhaustion of Russia’s commodity-based growth model.

A combination of falling oil prices, international sanctions, and structural limitations pushed Russia into a deep recession in 2015, with the GDP falling by close to 4%. The downturn continued through 2016, with GDP contracting by 0.6%. Government support for import substitution has increased recently in an effort to diversify the economy away from extractive industries. Russia is heavily dependent on the movement of world commodity prices and the Central Bank of Russia estimates that if oil prices remain below $40 per barrel in 2017, the resulting shock would cause GDP to fall by up to 5%.

Russia has undergone significant changes since the collapse of the Soviet Union, moving from a centrally planned economy towards a more market-based system. Both economic growth and reform have stalled in recent years, however, and Russia remains a predominantly statist economy with a high concentration of wealth in officials' hands. Economic reforms in the 1990s privatized most industry, with notable exceptions in the energy, transportation, banking, and defense-related sectors. The protection of property rights is still weak, and the state continues to interfere in the free operation of the private sector.
Russia is one of the world's leading producers of oil and natural gas, and is also a top exporter of metals such as steel and primary aluminum. Russia's reliance on commodity exports makes it vulnerable to boom and bust cycles that follow the volatile swings in global prices.
The economy, which had averaged 7% growth during the 1998-2008 period as oil prices rose rapidly, has seen diminishing growth rates since then due to the exhaustion of Russia’s commodity-based growth model.
A combination of falling oil prices, international sanctions, and structural limitations pushed Russia into a deep recession in 2015, with the GDP falling by close to 4%. ~~Most economists expect this~~ The downturn ~~will continue~~ continued through ~~2016.~~ 2016, with GDP contracting by 0.6%. Government support for import substitution has increased recently in an effort to diversify the economy away from extractive industries. ~~Although the Russian Ministry of Economic Development is forecasting a modest growth of 0.7% for 2016 as a whole, the Central Bank of~~ Russia ~~(CBR)~~ is ~~more pessimistic and expects the recovery to begin later in the year and a decline of 0.5% to 1.0% for the full year. Russia is~~ heavily dependent on the movement of world commodity prices and the ~~CBR~~ Central Bank of Russia estimates that if oil prices remain below $40 per barrel ~~beyond 2016,~~ in 2017, the resulting shock would cause GDP to fall by up to 5%.

The same text in 2018 and 2019.

Published as “Economy - overview”

Russia has undergone significant changes since the collapse of the Soviet Union, moving from a centrally planned economy towards a more market-based system. Both economic growth and reform have stalled in recent years, however, and Russia remains a predominantly statist economy with a high concentration of wealth in officials' hands. Economic reforms in the 1990s privatized most industry, with notable exceptions in the energy, transportation, banking, and defense-related sectors.

The protection of property rights is still weak, and the state continues to interfere in the free operation of the private sector. Russia is one of the world's leading producers of oil and natural gas, and is also a top exporter of metals such as steel and primary aluminum. Russia is heavily dependent on the movement of world commodity prices as reliance on commodity exports makes it vulnerable to boom and bust cycles that follow the volatile swings in global prices.

The economy, which had averaged 7% growth during the 1998-2008 period as oil prices rose rapidly, has seen diminishing growth rates since then due to the exhaustion of Russia’s commodity-based growth model. A combination of falling oil prices, international sanctions, and structural limitations pushed Russia into a deep recession in 2015, with GDP falling by close to 2.8%. The downturn continued through 2016, with GDP contracting another 0.2%, but was reversed in 2017 as world demand picked up. Government support for import substitution has increased recently in an effort to diversify the economy away from extractive industries.

Russia has undergone significant changes since the collapse of the Soviet Union, moving from a centrally planned economy towards a more market-based system. Both economic growth and reform have stalled in recent years, however, and Russia remains a predominantly statist economy with a high concentration of wealth in officials' hands. Economic reforms in the 1990s privatized most industry, with notable exceptions in the energy, transportation, banking, and defense-related sectors. The protection of property rights is still weak, and the state continues to interfere in the free operation of the private sector.
Russia is one of the world's leading producers of oil and natural gas, and is also a top exporter of metals such as steel and primary aluminum. ~~Russia's~~ Russia is heavily dependent on the movement of world commodity prices as reliance on commodity exports makes it vulnerable to boom and bust cycles that follow the volatile swings in global prices. The economy, which had averaged 7% growth during the 1998-2008 period as oil prices rose rapidly, has seen diminishing growth rates since then due to the exhaustion of Russia’s commodity-based growth model.
A combination of falling oil prices, international sanctions, and structural limitations pushed Russia into a deep recession in 2015, with ~~the~~ GDP falling by close to ~~4%.~~ 2.8%. The downturn continued through 2016, with GDP contracting ~~by 0.6%.~~ another 0.2%, but was reversed in 2017 as world demand picked up. Government support for import substitution has increased recently in an effort to diversify the economy away from extractive industries. Russia is heavily dependent on the movement of world commodity prices and the Central Bank of Russia estimates that if oil prices remain below $40 per barrel in 2017, the resulting shock would cause GDP to fall by up to 5%.

Russia has undergone significant changes since the collapse of the Soviet Union, moving from a centrally planned economy towards a more market-based system. Both economic growth and reform have stalled in recent years, however, and Russia remains a predominantly statist economy with a high concentration of wealth in officials' hands. Economic reforms in the 1990s privatized most industry, with notable exceptions in the energy, transportation, banking, and defense-related sectors.

The protection of property rights is still weak, and the state continues to interfere in the free operation of the private sector. Russia is one of the world's leading producers of oil and natural gas, and is also a top exporter of metals such as steel and primary aluminum. Russia is heavily dependent on the movement of world commodity prices as reliance on commodity exports makes it vulnerable to boom and bust cycles that follow the volatile swings in global prices.

The economy, which had averaged 7% growth during the 1998-2008 period as oil prices rose rapidly, has seen diminishing growth rates since then due to the exhaustion of Russia’s commodity-based growth model. A combination of falling oil prices, international sanctions, and structural limitations pushed Russia into a deep recession in 2015, with GDP falling by close to 2.8%. The downturn continued through 2016, with GDP contracting another 0.2%, but was reversed in 2017 as world demand picked up. Government support for import substitution has increased recently in an effort to diversify the economy away from extractive industries.

Russia has undergone significant changes since the collapse of the Soviet Union, moving from a centrally planned economy towards a more market-based system. Both economic growth and reform have stalled in recent years, however, and Russia remains a predominantly statist economy with a high concentration of wealth in officials' hands. Economic reforms in the 1990s privatized most industry, with notable exceptions in the energy, transportation, banking, and defense-related sectors. The protection of property rights is still weak, and the state continues to interfere in the free operation of the private sector. Russia is one of the world's leading producers of oil and natural gas, and is also a top exporter of metals such as steel and primary aluminum. Russia is heavily dependent on the movement of world commodity prices as reliance on commodity exports makes it vulnerable to boom and bust cycles that follow the volatile swings in global prices. The economy, which had averaged 7% growth during the 1998-2008 period as oil prices rose rapidly, has seen diminishing growth rates since then due to the exhaustion of Russia’s commodity-based growth model. A combination of falling oil prices, international sanctions, and structural limitations pushed Russia into a deep recession in 2015, with GDP falling by close to 2.8%. The downturn continued through 2016, with GDP contracting another 0.2%, but was reversed in 2017 as world demand picked up. Government support for import substitution has increased recently in an effort to diversify the economy away from extractive industries.

The same text in 2021 and 2022.

Russia has undergone significant changes since the collapse of the Soviet Union, moving from a centrally planned economy towards a more market-based system. Both economic growth and reform have stalled in recent years, however, and Russia remains a predominantly statist economy with a high concentration of wealth in officials' hands. Economic reforms in the 1990s privatized most industry, with notable exceptions in the energy, transportation, banking, and defense-related sectors. The protection of property rights is still weak, and the state continues to interfere in the free operation of the private sector.

Russia is one of the world's leading producers of oil and natural gas, and is also a top exporter of metals such as steel and primary aluminum. Russia is heavily dependent on the movement of world commodity prices as reliance on commodity exports makes it vulnerable to boom and bust cycles that follow the volatile swings in global prices. The economy, which had averaged 7% growth during the 1998-2008 period as oil prices rose rapidly, has seen diminishing growth rates since then due to the exhaustion of Russia’s commodity-based growth model.

A combination of falling oil prices, international sanctions, and structural limitations pushed Russia into a deep recession in 2015, with GDP falling by close to 2.8%. The downturn continued through 2016, with GDP contracting another 0.2%, but was reversed in 2017 as world demand picked up. Government support for import substitution has increased recently in an effort to diversify the economy away from extractive industries.

Russia has undergone significant changes since the collapse of the Soviet Union, moving from a centrally planned economy towards a more market-based system. Both economic growth and reform have stalled in recent years, however, and Russia remains a predominantly statist economy with a high concentration of wealth in officials' hands. Economic reforms in the 1990s privatized most industry, with notable exceptions in the energy, transportation, banking, and defense-related sectors. The protection of property rights is still weak, and the state continues to interfere in the free operation of the private sector.
Russia is one of the world's leading producers of oil and natural gas, and is also a top exporter of metals such as steel and primary aluminum. Russia is heavily dependent on the movement of world commodity prices as reliance on commodity exports makes it vulnerable to boom and bust cycles that follow the volatile swings in global prices. The economy, which had averaged 7% growth during the 1998-2008 period as oil prices rose rapidly, has seen diminishing growth rates since then due to the exhaustion of Russia’s commodity-based growth model.
A combination of falling oil prices, international sanctions, and structural limitations pushed Russia into a deep recession in 2015, with GDP falling by close to 2.8%. The downturn continued through 2016, with GDP contracting another 0.2%, but was reversed in 2017 as world demand picked up. Government support for import substitution has increased recently in an effort to diversify the economy away from extractive industries.

The same text in 3 editions, 2023 to 2025.

natural resource-rich Eurasian economy;
leading energy exporter to Europe and Asia;
decreased oil export reliance;
endemic corruption, Ukrainian invasion, and lack of green infrastructure limit investment and have led to sanctions

Rewritten: too little of the 2022 text remains to mark the changes.
natural resource-rich Eurasian economy; leading energy exporter to Europe and Asia; decreased oil export reliance; endemic corruption, Ukrainian invasion, and lack of green infrastructure limit investment and have led to sanctions

Economic overview Russia, in 34 editions.

2025 edition

2025 edition

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