Russia Economy Facts
Russia has enormous natural resources, a broad industrial base and a relatively well-educated population. The manufacturing industry and the service sector are growing, but dependence on raw material production is still high. The extensive oil and gas exports give Russia a large surplus in foreign trade, but at the same time make the Russian economy very sensitive to price fluctuations in the world market. It became obvious in the fall of 2014 when a sharp fall in oil prices deepened the widespread economic problems triggered by Russia’s involvement in the war in Ukraine.
The transition from Soviet-centric planned, resource-wasting and inefficient production to a modern market economy was painful for the Russians. During Russia’s first time as an independent state in the 1990s, the standard of living of broad population groups fell sharply. Production decreased and many large industrial companies ceased to function. The state budget was drawn with constant deficits and Russia was heavily indebted.
- Countryaah.com: Major imports by Russia, covering a full list of top products imported by the country and trade value for each product category.
In August 1998, government finances collapsed. The state was unable to pay its domestic loans and the value of the ruble against other currencies decreased drastically.
The financial crash and the write-down of the value of the ruble proved to be a health cure for the Russian economy. Exports benefited, while imports became more expensive, which promoted the country’s own production. At the same time on the world market, oil prices rose to record highs, which greatly increased Russian export earnings. A period of steady growth of about 7 percent per year followed. The standard of living began to rise and consumption increased.
- Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including RUS which represents the country of Russia. Check findjobdescriptions to learn more about Russia.
Ownership had been concentrated during the 1990s to a few very wealthy people, oligarchs, who bought up state commodity resources. Foreign large companies also began to buy into the Russian commodity extraction.
When Putin became president in 2000, he made sure to reduce the political power of the oligarchs (see Modern History). The influence of the state on business increased again, which cooled the desire of foreign investors to invest money in Russia.
In parallel with the nationalization of strategically important assets such as the oil industry, a series of reforms were implemented to strengthen the market economy. The rules for companies were simplified, as was the tax legislation. Income tax was the same for everyone, 13 percent. The corporate tax and VAT were lowered at the same time as the collection of taxes became more efficient and the state budget began to show surplus.
The large revenues from oil and natural gas exports enabled the Russian government to pay off government debt and build up a powerful foreign exchange reserve. When the global financial crisis hit in the fall of 2008, thanks to the reserves, the government was able to maintain the value of the ruble for a time and help domestic banks and companies that had taken out large foreign loans. This did not prevent the prices of the Moscow stock market from falling sharply, partly as a result of the war in Georgia in August of the same year, partly as a result of falling oil prices. Towards the end of the year, the value of the ruble was written down by a total of about 20 percent. At the same time, the foreign exchange reserve shrank sharply.
Growth was just over 6 percent in 2008, but as the economy appeared to be heading into a period of decline, in early 2009, the central bank decided to lower the value of the ruble again, which reached its lowest level against the dollar in nearly six years.
Gross domestic product decreased in 2009 by a total of almost 8 percent and unemployment increased. As a result of the crisis, some initiatives were taken to modernize the economy, including investments in technology and research. A new privatization wave began in 2011.
The economy began to recover relatively quickly compared to other countries affected by the financial crisis and showed growth of around 4 percent during the period 2010–2011. But only a little had changed about the fundamental problems of the Russian economy: unilateral dependence on oil and gas exports, widespread bureaucracy, widespread corruption and an uncertain legal position for investors.
In 2014, the situation changed as the outside world imposed extensive sanctions on Russia as a result of the Ukraine war (see Foreign Policy and Defense and Calendar). Russian banks had problems borrowing money abroad, foreign investors fled the country, the ruble collapsed in value and inflation soared. The ban on imports of food from the EU, the US and some other western countries caused many store shelves to gap empty and the Russians began to hoard. The crisis was compounded by the dramatic fall in oil prices that occurred in the second half of 2014. From having been above $ 100 a barrel in the summer more than halved the price until January 2015 when the bottom listing was just over $ 40 a barrel. The government tried to curb the crisis by raising interest rates and buying rubles, but the race could not stop. International credit rating agencies lowered Russia’s status to debris and predicted that the country’s economy would shrink by 4 to 5 percent in the coming year.
At the beginning of 2015, President Putin stated that he and the government were naïve as they expected oil prices to be stable. The same month, the government launched a comprehensive support package to counter the crisis.
Since then, oil prices have risen but are far from previous levels and the market is still shaky. After a deep dive in 2015, Russian growth has been above zero but at a low level and foreign sanctions continue to hamper development.
In early 2018, the government launched a series of “national projects” with the aim of accelerating growth and raising living standards. The projects included investments equivalent to more than US $ 400 billion in infrastructure, digital economy, education and health care until 2024. However, the first two years saw the implementation of the reforms slow. The government that took office in early 2020 promised to increase the pace.
FACTS – FINANCE
GDP per person
$ 11,289 (2018)
US $ 1 657 554 M (2018)
2.3 percent (2018)
Agriculture’s share of GDP
3.1 percent (2018)
Manufacturing industry’s share of GDP
12.3 percent (2018)
The service sector’s share of GDP
54.1 percent (2018)
4.7 percent (2019)
Government debt’s share of GDP
14.6 percent (2018)
US $ 492,763 M (2017)
Adopted by the WTO
After 18 years of negotiations, Russia is accepted as a member of the WTO. Membership comes into force when ratified by Russia, which will take place within 220 days (see July 2011).
Demonstrations following alleged election fraud
The election procedure is accused of electoral fraud, including by private individuals who documented the voting. The election monitoring organization Golos’ website is hacked. The reports of cheating lead to demonstrations in Moscow. During these, over a thousand people are arrested temporarily, including some known oppositionists. In response to the demonstrations, Medvedev promises political reforms “to facilitate the participation of citizens in the political process”. The general elections for regional governor posts should be reinstated, he says. The elections were abolished by Putin in 2004 and since then the governors have been appointed by the Kremlin. Medvedev also states that it will be easier to found parties and register as a candidate in the presidential and parliamentary elections.
United Russia gets its own majority in parliament
In the election to the Duma (Parliament), Putin’s United Russia rallies from 64 percent (2007) to just over 49 percent. However, the distribution of the votes cast on the parties that do not enter Parliament results in the United Russia obtaining its own majority in Parliament. The other three parties in the duma are moving forward. The Communist Party is growing the most – from just over 11 to just over 19 percent. A fair Russia comes in third place with just over 13 percent (against previously just under 8) and the Liberal Democrats get just under 12 percent (against earlier just over 8).
Magnitsky abused – investigation
An investigation by the company where the deceased lawyer Sergei Magnitsky worked (see November 2009) shows that Magnitsky was already dead when he was picked up by ambulance from the detention center where he was held. The guards must have tied Magnitsky to a bed and hit him with batons. The report is submitted to the Russian Presidency for Human Rights.
Putin presidential candidate
At the United Russia Party Congress, Prime Minister Putin announces that he will run for president in the 2012 presidential election.
Attacks in Chechnya during Ramadan party
Nine people, most of them police, are killed in a suicide bombing in Chechnya’s capital Grozny. The deed, which is the most serious in the city in several years, is staged during the party that ends the Muslim fasting month of Ramadan.
Former police are charged with Politkovskaya murder
A former Moscow police officer is arrested on suspicion of organizing the murder of Anna Politkovskaya. The chief of police must have hired the Chechen Machmudov, who is believed to have carried out the murder.
Machmudov arrested for Politkovskaya murder
Russian police arrest Chechen Rustan Machmudov, who is accused of shooting Anna Politkovskaya to death.
Military takes on Umarov’s death
Russian military claims to have killed Caucasian Islamist leader Doku Umarov, who took on the airport attack, but the task is called into question.
Skiers are killed in attacks in Kabardino-Balkaria
Five skiers are killed in various attacks in Kabardino-Balkaria, not far from the upcoming Olympic city of Sochi.
Suicide bombings on Domodedovo
At least 35 people are killed in a suicide bombing at the Moscow airport Domodedovo.