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Country Forecast Russia

  • ID: 2138627
  • Country Profile
  • Region: Russia
  • 52 Pages
  • The Economist Intelligence Unit
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Background: The transition to a market economy in the early 1990s was accompanied by a collapse in industrial production and a sharp drop in living standards. A contested privatisation process led to a highly concentrated ownership structure. Executive weakness and bureaucratic dysfunction contributed to a sharp decentralisation of power. After becoming president in 2000, Vladimir Putin sought to restore central control over the regions and tame independent corporate interests. Mr Putin presided over a period of strong economic growth in his first two terms. His re-election as president in 2012 and 2018 heralded the development of a more authoritarian domestic environment.

Political structure: Boris Yeltsin won the first democratic presidential election in June 1991 and was re-elected in 1996. Repeated confrontations with the legislature culminated in the dissolution of parliament in 1993 and a violent showdown in the following month. The powers of the executive were greatly increased by a new constitution, adopted in 1993. Mr Putin was elected president in 2000 and re-elected for a second term in 2004. His second term in office was characterised by increasing centralisation of the state. A loyal ally, Dmitry Medvedev, won the presidential election in 2008 and took over in May of that year. Mr Putin returned to the presidency for a third term in 2012. Following a constitutional change, Mr Putin's third term lasted six years, to 2018. He was re-elected to a fourth term in March 2018.

Policy issues: During Mr Putin's third term as president greater emphasis was placed on conservative values, anti-Westernism and great-power nationalism. The stand-off with the West is leading to a rollback of Russia's integration into the world economy, and attempts to insulate the Russian economy from Western financial channels. This is likely to strengthen further the state's role in the economy. Tit-for-tat sanctions have encouraged the government to emphasise import substitution. The focus on curbing "foreign influence" on domestic politics is likely to endure, along with close controls on civil society, the internet and the media.
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Country Forecast Russia

Russia--highlights: Political outlook

Russia--highlights: Business environment outlook

Russia--highlights: Economic outlook

Russia--highlights: Demographic outlook

Russia--highlights: Market opportunities

Russia--highlights: Long-term outlook

Fact sheet

Political outlook: Political forces at a glance

Political outlook: Political stability
Social unrest is a risk, but not our core scenario

Political outlook: Political and institutional effectiveness
Quality of public administration remains poor
Corruption cases are often used to settle business or political scores

Political outlook: Election watch

Political outlook: International relations

Business environment outlook: Business environment rankings
Russia's business environment remains difficult

Business environment outlook: Russia's business environment at a glance
Policy towards private enterprise and competition
Policy towards foreign investment
Foreign trade and exchange controls
Taxes
Financing
The labour market
Infrastructure
Technological readiness

Business environment outlook: Macroeconomic environment

Business environment outlook: Policy towards private enterprise and competition
There will be little privatisation over the forecast period

Business environment outlook: Policy towards foreign investment
There are significant regional variations in the business environment

Business environment outlook: Foreign trade and exchange controls
We do not expect formal capital controls to be imposed
The use of economic sanctions is now well established as a policy tool

Business environment outlook: Taxes
Main tax rates will not fluctuate substantially
The government is overhauling the tax system in the energy sector

Business environment outlook: Financing
International sanctions constrain external borrowing
Banking sector fragmentation has decreased in recent years

Business environment outlook: The labour market
Labour costs are low relative to high education levels

Business environment outlook: Infrastructure
Infrastructure links with China will grow

Business environment outlook: Technological readiness
Investment levels are low

Economic forecast: Policy trends

Economic forecast: Fiscal policy

Economic forecast: Monetary policy
The central bank will remain cautious

Economic forecast: International assumptions

Economic forecast: Economic growth

Economic forecast: Sectoral trends
Agriculture will be one of the strongest growth sectors in 2019-23
Services will recover only slowly, as household spending will remain weak

Economic forecast: Oil and gas
Western financial sanctions constrain investment in the energy sector
Crude oil represents a major commodity export
EU and US energy sanctions are likely to remain in place in 2019-23

Economic forecast: Inflation

Economic forecast: Exchange rates

Economic forecast: External sector
The current account will remain in surplus

Economic forecast: Foreign direct investment in Russia
Stocks and flows
Origin and distribution
Determinants
Impact
Potential

Demographic assumptions
Russia suffered a major demographic shock after the fall of the Soviet Union
Population decline will resume over the forecast period
Population is ageing rapidly

Market opportunities: Market outlook
Average incomes will recover slowly, but the luxury market will remain robust
Russian sanctions on EU food imports will remain

Market opportunities: Consumer expenditure
Despite the weaker economic outlook, e-commerce has room for strong growth

Market opportunities: Social indicators and living standards

Long-term outlook: The long-term outlook
Skill levels compare favourably with those in many emerging markets
A weak demographic outlook weighs on growth
Competition is low and the regulatory burden high

Long-term outlook: Long-term trends
Climate change and sustainability
International financial sanctions

Long-term outlook: Methodology for long-term forecasts
Growth projections
Definitions of variables
The independent variables include:
Summary of findings
Productivity growth

Data summary: Global outlook

Data summary: Gross domestic product, current market prices

Data summary: Gross domestic product, at constant prices

Data summary: Gross domestic product by sector of origin

Data summary: Growth and productivity

Data summary: Economic structure, income and market size

Data summary: Fiscal indicators

Data summary: Monetary indicators

Data summary: Employment, wages and prices

Data summary: Current account and terms of trade

Data summary: Foreign direct investment

Data summary: External debt

Data sources and definitions
Global data
Domestic data
Abbreviations

Guide to the business rankings model
Outline of the model
Calculating the rankings
Measurement and grading issues

Indicator scores in the business rankings model
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