Country Report

Country Report

  • Submitted By: mherter65
  • Date Submitted: 02/14/2009 9:35 PM
  • Category: Business
  • Words: 3195
  • Page: 13
  • Views: 456

Country Report

of the

Russian Federation



Michael Herter

MGMT 495

Two months prior to the collapse of the Soviet Union, President Yeltsin began a number of sweeping economic changes for his country. The first change was to remove the old central economic planning system that had bogged the growth of its country and replace it with a market driven economic system. This new system was a shock to a country who had been dominated by communist rule and was not a success during the first decade. Russia had and still has a vast supply of natural resources but the former communist dictators would not allow for infrastructure improvements and this was their biggest problem. How would they get to those vast resources? With a population of about half and a land mass that is 1.8 times that of the United States, Russia could certainly become a major trade partner with the west.

Today’s Economy:

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 6% 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 31% of GDP, mainly due to decreasing state debt, although commercial debt to foreigners has risen...

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