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Last reviewed: 27 July 2009

Country information

ECONOMY

Basic Economic Facts

GDP: $ 1.677 trillion (2008)
GDP per head: $ 11807 (2008)
Annual growth: 5.6% (2008)
Inflation: 13.3% (rolling inflation 12.3% as of May 2009)
Major industries: Oil, gas, timber, metals, machinery, chemicals and arable farming.
Major import partners: Germany 13.9%, China 9.7%. Japan 5/9%, South Korea 5.1%. US (4.8%), France 4.4%, Italy 4.3%, UK 2.0% 
Major export partners: Netherlands 12.3%, Italy 8.6%, Germany 8.4%, Chjina 5.4%, Ukraine 5.1%, Turkey 4.9%, Switzerland 4.1%.
UK exports to Russia: £4.1 billion (2008)
UK Imports from Russia: $6.7 billion (2008)
UK Investment in Russia: $9 billion (2006)

Impact of the Economic Crisis on the Russian Economy

The Russian economy, like many around the world, now appears severely affected by the global slowdown. From 1999 to 2008, the economy benefited from strong growth, averaging about 7% per annum. This growth was accompanied by budget surpluses (4% in 2008), allowing the Russian government to accumulate reserves of almost $600bn.

However, the effects of falling oil prices and the financial crisis have taken their toll on Russia. Oil and gas are crucial to the Russian economy, accounting for over 20% of GDP, 50% of federal budget revenues and 60% of exports. In 2008, after peaking at $149 per barrel in July, the oil price fell as low as $35 per barrel in December.

The Russian Federal Budget and economic forecast for 2009 were originally formulated on the basis of an average oil price of $95 per barrel. On 19 January, Minister of Economic Development, Elvira Nabiullina presented a new economic forecast based on an average of $41 per barrel in 2009. On the basis of this forecast, Parliament has approved the 2009 budget which targets a deficit equal to 7.4% of the GDP.

The Russian Rouble

The value of the Russian rouble, like the Russian economy as a whole, is closely aligned to the oil price and so has also dropped since the summer of 2008. From mid-November the Russian Central Bank began a managed devaluation of the rouble. By 22 January 2009 the rouble had lost more than 30% of its value against the bi-currency basket (dollar and euro). Since that time a hike in oil prices and a renewed inflow of foreign capital has seen the rouble strengthen from its record low in March.   

International involvement

Russia’s involvement in the international economy had been deepening rapidly until the economic crisis. Foreign direct investment in Russia reached $103 billion in 2008, and Russian companies were increasingly interested in foreign acquisitions. Russia has been negotiating WTO membership for over 16 years. It recently announced that it would withdraw its accession bid and pursue membership as a Customs Union with Belarus and Kazakhstan. The exact terms of such a bid are currently under negotiation with the WTO Secretariat. In the meantime it is continuing dialogue with the OECD over possible membership. At the OECD's annual ministerial meeting in May 2007 member states agreed to open accession talks with Russia.

Other Economic Challenges

Russia faces wider economic problems, some previously masked by the oil boom. Businesses complain of high levels of bureaucracy and corruption.  This is underlined by the small size of Russia’s SME sector (around 13% of GDP).  The 2009 World Bank’s Doing Business survey ranks Russia 120th out of 181 countries, indicating significant bureaucratic challenges in the business environment. Corruption is endemic in Russia.  In 2008, Russia fell in Transparency International’s corruption perception index to 147th out of 180 countries.

In the longer term, Russia’s demographic deficit may lead to significant labour shortages. Russia’s population is falling by over 700,000 per year.  Some analysts predict that it could fall from its current 142m to 120-125m by 2025.  Male life expectancy is now 58 years.  There is already a shortfall of appropriately-trained workers, which is exacerbated by low labour mobility.

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Russian Federation

Address:

6/7 Kensington Palace Gardens
London W8 4QP
Website: www.great-britain.mid.ru

Consular Department
5 Kensington Palace Gardens
London
W8 4QS

Office of the Trade Representative
33 Highgate West Hill
London
N6 6NL
E-mail: info@rustradeuk.org
Website: www.rustradeuk.org

Telephone:

(020) 7229 2666/3628/6412
(020) 7229 8027 Consular Section
(020) 8340 4492/1907 Office of the Trade Representative
 

Fax:

(020) 7727 8625
020 7229 3215 Consular Department
020 848 0112 Office of the Trade Representative

Email: office@rusemblon.org

Email: info@rusemblon.org

Email: info@rustradeuk.org

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