Raw materials in particular are generating growth in Russia. Despite dynamic development in this area, however, the Russian economy is faced with a number of structural problems.
After contracting by almost 8 % in 2009, Russian gross domestic product (GDP) returned to moderate growth of 4 % in the past year and the country is expected to see similar growth rates over the next three years on the back of high raw material prices, rising industrial production and increased employment.
According to an analysis by the German Ministry of Foreign Affairs, inflation is a cause for concern, having leapt to more than 10 % in early 2011 after figures of 8.8 % in the previous two years. As one of the world’s most important energy producers, the largest country on the planet in terms of size is home to a quarter of global gas reserves, more than 6 % of global oil reserves and the second-highest level of coal reserves at 19 % of the world total. Since the economic crisis in late 2008, the domestic economy has been affected by the downturn in overall economic output and falling oil prices, and deficits are also expected in the coming years.
To ensure additional income, the Russian government is raising taxes in sectors such as raw material extraction. The partial privatisations of state-owned companies that are being initiated in 2011 will generate further funds to offset the increase in government expenditure. Russia is also raising funds on the capital markets again with a view to covering future deficits. With a debt
to GDP ratio of a good 10 %, the country has a relatively comfortable starting position.
Extensive need for modernisation
Retail, hospitality and transportation is the most important sector of the Russian economy, accounting for 30.3 % of GDP. A range of challenges must be tackled in order to ensure continued positive economic development, such as promoting small and medium-sized enterprises and investments in outdated infrastructure, particularly in the areas of energy, transportation and logistics. This extensive need for modernisation will help the country to remain an important and receptive export and investment market. Doing business in Russia requires prudence and careful consultation in light of the various factors and characteristics that are specific to the country.
Customs clearance, certification and administrative procedures in Russia can be time-consuming and fraught with difficulty. The Russian government has addressed one of the main problem areas for foreign trade by adopting anti corruption legislation. In terms of environmental and climate issues, Russia has set itself the target of cutting emissions by up to 25 % compared with 1990. Environmental protection is also being tackled through legislation on energy conservation and improved energy efficiency.
Russia is currently in negotiations on accession to the World Trade Organisation (WTO), which would be an important step in the country’s economic integration. Since being granted full membership of the G8 (the group formed by the world’s seven leading economies plus Russia) in 2002, Russia enjoys an equal footing with the major western market democracies. The country is also seeking to become a member of the Organisation for Economic Cooperation and Development (OECD).