TEAM RUSSIATHE BRICS

RUSSIA’S ECONOMY

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. Economic reforms in the 1990s privatized most industry.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 aluminium. Russia's reliance on commodity exports makes it vulnerable to boom and bust cycles that follow the volatile swings in global prices.

RUSSIA ECONOMY II

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.

GDP (ppp): $2.553 trillion (2013) $18,100 per capita (2013)

Population below poverty line 11% unemployment rate 5.8% (2013)

$515 billion exports (2013) 10th largest exporter in the world, 16.6% goes to chine 12.2% to Germany

$341 billion imports (2013 est.)

ASSESSING INCOME INEQUALITY

Russia has one billionaire for every $11 billion in wealth while, across the rest of the world, there is one billionaire for every $170 billion.

the total wealth of the Russian nation is $1.2 trillion. If Russian billionaires have 35% of that figure, their combined wealth should be around $420 billion.The life expectancy in Russia is 69.1 years oldaverage years of schooling : Girl 14.3 Boy 11.7

FOREIGN DIRECT INVESTMENT

Russian FDI will fall to 30 billion euros ($41 billion) from 59.7 billion euros last year, the steepest decline in Eastern Europe

75% of the FDI comes from the EU.

Russia was ranked second in Europe in 2012 in terms of employment generated through FDI

Another impact of the increasing FDI investment is that they had a supermarket revolution in the 2000’s, as well as a 35% foreign share in sales.

Rates of FDI (net inflow) 2009-20132009 36,583,098,400 2010 43,167,769,100 2011 55,083,632,500 2012 50,587,554,7002013 70,653,718,709

BALANCE OF TRADE Russia’s economy relies on energy revenue to drive economic growth. Devaluation of the rubble in 1999, made Russian firms more competitive domestically and internationally. This kicked off the growth of the Russian economy.

• Joined WTO on Aug 22nd 2012.

• 3rd biggest trading partner with EU

• EU exports to Russia are dominated by machinery and transport equipment, chemicals, medicines and agricultural products.

• EU imports from Russia are dominated by raw materials, in particular, oil (crude and refined) and gas. For these products, as well as for other important raw materials.

• The EU is the most important investor in Russia. It is estimated that up to 75% of Foreign Direct Investment stocks in Russia come from EU Member States. Trade balance of $15848million in August of 2014

• Russia averaged $8893.30million from 1997 until 2014

• Russia’s high trade balance is due exporting commodity goods mainly crude oil.

• Main exports are oil and natural gas (58 percent of total exports), nickel, iron and chemical products. Others include: cars, military equipment and timber.

• Main trading partners are: China (7 percent of total exports and 10 percent of imports), Germany (7 percent of exports and 8 percent of imports) and Italy.

STATE OWNED ENTERPRISES After the break-up of the Soviet Union, many state owned enterprises were being privatised, such as energy and financial sectors.

Examples of state owned enterprises:

Russian Railways (100% owned by the state)

Russian Airlines (51% owned by the state)

Their privatised businesses are relatively new (around 20 years old), therefore they’re not experienced enough to manage infrastructure, and may focus less on quality as profits may come first. Can be more efficient if the Government has more control.

REGULATION IN THE ECONOMY• Russia has a command economy- a system where the government, rather than the

free market, determines what goods should be produced, supply and price

• State control in the Russian economy is extensive- SOE’s, regulation

• It is also unclear which firms are public or private sector

• The government places huge administrative loads on entrepreneurs

• The overall level of regulation is excessive is likely to limit economic growth compared to other BRIC nations

• They aim to transition from an oil dependant economy to a more technology orientated economy

• Russian government are offering tax subsidies to innovative firms

CONSTRAINTS TO GROWTH• Russia has increasingly used its revenues from energy exports to

strengthen the Putin regime• As new, cheaper energy providers emerge and the market becomes

leaner and more competitive• Russia are looking to expand into the technology market • There is a huge inequality in the distribution of wealth• Inefficient capital and inefficient equipment results in low productivity,

causing a loss in competitive advantage on a global scale (less appealing to FDI)

• Also administrative processes take a long time eg. Planning permission

• There is alleged corruption amongst the government• Strong government regulation, discourages entrepreneurship, less

private businesses develop

CONCLUSION