RUSSIA

A large diverse country with vast natural resources striving to find its place in the world after the 1991 breakdown of the Soviet Union Geographically the largest country and the seventh most populous country in the world Vast variety of natural resources mostly located far from industrial processing centers Total area: 17,075,200 sq km (approximately 1.8 times the size of the U.S.) Population:  142.89 million Government type: Federation Administrative division: 48 "oblasts", 21 republics, 9 autonomous "okrugs", 7 "krays", 2 federal cities, and 1 autonomous "oblast" Capital + other major cities: Moscow (10.3 million) + St. Petersburg (4.7 million), Novosibirsk (1.4 million), Yekaterinburg (1.3 million), Nizhniy Novgorod (1.33 million) , Omsk (1.1 million), Samara (1.2 million), Kazan (1.1 million), Chelyabinsk (1.1 million) , Rostov-na-Donu (1.1 million), Ufa (1.0 million), Volgograd (1.0 million), Perm (1.0 million) Currency: Russian ruble (RUR)

Languages: Russian (official), many minority languages (roughly 100 other languages are spoken in Russia)
Ethnicity: Russian 79.8%, Tatar 3.8%, Ukrainian 2%, Bashkir 1.2%, Chuvash 1.1%, other or unspecified 12.1%
Religion: Russian Orthodox 15-20%, Muslim 10-15%, other Christian 2%, Russia has large population of non-practicing believers and non-believers
President: (Mr.) Dmitry MEDVEDEV (since 7 May 2008)
Prime Minister: (Mr.) Vladimir PUTIN (since 8 May 2008)


MACROECONOMIC OVERVIEW

Selected economic indicators, Russia, 2005 - 2011

Source: Federal Statistical Service, Central Bank of Russian Federation, Global Finance, IMF, 2011


Russia’s economy has undergone tremendous changes since 1991 when it started its transition from the Soviet state 5-year-based planning system to a free-market economy. This initially resulted in large drops in Russia’s GDP as the aggregate GDP fell by 37% between 1992 and 1996. In addition, Russia was plagued by hyperinflation (e.g. in 1992, the annual inflation rate reached 2,500%).

Since 1999, Russia’s GDP has experienced a period of continuous growth, mainly attributed to fast-growing oil and gas sales, government tax reforms, higher confidence of investors plus inflationary rates have been stabilized below 12%. 2006 was the first year since the breakdown of the Soviet Union when inflation rates remained in single digits, reaching 9.7%.

Russia’s real GDP growth rates reached 8.1% in 2007 and 5.2% in 2008, and gas and oil prices have had a significant impact on Russia’s growth. Significant disparity also exists in regional GDP contributions as Moscow accounts for 20% of Russia’s GDP, oil rich province of Tyumen for 13%, while 72 of total 87 Russia’s jurisdictions combine for 37%. Large enterprises continue to dominate the economy while small and medium size-companies account for only 10 to 15% of GDP.

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

STRUCTURE OF ECONOMY


Source: CIA, The World Factbook, 2009


KEY SECTORS

During the 1990s, Russia’s economic structure changed tremendously. Between 1991 and 2005, the share of GDP for the agriculture sector decreased from 14% to 5% and industry from 50% to 37% while the share of services sector grew from 36% to 58%.

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

Russia is striving to reduce its dependency on raw materials exports. Both light and heavy industry are threatened by outdated infrastructure and their inability to compete on the world market.

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

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

Arms sales have increased to the point where Russia leads the world in sales of weapons.

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