World economies
Russia, the largest country in the world, has an upper-middle income mixed economy and is one of the world’s leading producers of oil and natural gas, and a top exporter of metals such as steel and primary aluminum.
Russia contains over 30 per cent of the world’s natural resources. The World Bank estimates the total value of its natural resources at $75 trillion. Income from vast natural resources, above all oil and gas, helped it overcome the economic collapse of 1998.
However, Russia remains a predominantly statist economy with a high concentration of wealth in officials’ hands.
After a two-year recession, GDP growth reversed in 2017 bolstered by higher oil prices and supportive monetary policies amid lower inflation. Government support for import substitution also increased in an effort to diversify the economy away from extractive industries.
According to the preliminary estimates, Russia’s GDP expanded by 1.5pc in 2017 compared with a 0.2pc contraction in 2016, the first-year of growth since 2014.
Russia’s economy is seen growing faster this year and the next because of improving consumer demand.
According to the World Bank in an environment of relatively high oil prices, macro-stabilisation and improved business and consumer confidence, economic growth will continue with GDP increasing by 1.7pc in 2018 and 1.8pc in 2019, because of higher exports and stronger domestic demand.
Russia’s fiscal picture has become brighter due to higher oil prices, strong demand for the country’s bonds and a change in fiscal rules, which should give the government room to adjust the budget.
In 2018, a shift to budget surplus, and a return to growth of the National Wealth Fund and the total national debt compared with GDP is very much expected.
The 2018 budget plans to increase social spending, made up by reducing spending in other fields. The goal is to reduce the deficit whilst boosting demand. The budget surplus can be one per cent of GDP in 2018.
Starting 2019, the budget is no longer expected to curb GDP growth. Structural changes and improvements in efficiency of budget expenditures will be able to trigger economic growth.
The government preference for sound, conservative financial management, reflected in a marked improvement of Russia’s external financial position in 2017 with low government debt of 12pc of GDP. The debt stocks of some Russian regions, however, have grown rapidly in recent years relative to their limited regional tax base.
The country’s poverty rate, which had fallen from 29pc in 2000 to 10.7pc in 2012, inched back up to 13.5pc in 2016. The World Bank has recently reported that less than half of the population, 46.3pc, was secure from sinking into poverty, but about 10pc lower than in 2014.
According to a study by Credit Suisse bank, the richest 10pc of Russians control 77pc of the wealth. The government vowed to halve poverty figures in six-years and boost growth to four pc, promising investment into infrastructure, health and housing.