Russian Economy - 8 Years Later

Eight years ago, Russia's first president, Boris Yeltsin, nominated Vladimir Putin as the new acting prime minister. On December 31 of the same year, Yeltsin resigned, leaving Prime Minister Putin to come in as acting president. Thus a new economic era in Russia's history began. Overall, the past eight years represent a period of numerous economic successes.

Strong economic growth
Russia was the world's 22nd largest economy in 1999, ranked 11th in 2006, and could even rise to ninth position in 2008, according to IMF forecasts. Dollar GDP in 2007 is projected to reach $1.3 trillion, 6.4 times higher than the reported figure in 1999. The average salary has increased to $540 per month in August 2007, from $65 per month in August 1999, and the population's real disposable income doubled between 1999 and 2006.

Foreign-debt reduction
In 1999, Russia's foreign debt amounted to more than 70 percent of GDP. In 2005 and 2006, Russia paid down $37 billion of Paris Club debt ahead of schedule. Today total foreign debt is only $47.8 billion - one-third of what it was in 1999.

Stabilization Fund
The Stabilization Fund was set up in 2004 as a tool to sterilize oil money inflows into Russia, and to save windfall revenues for future generations. Today, the fund, which is managed by the Finance Ministry, exceeds $120 billion, and continues to grow as the price of oil remains high.

Fiscal stabilization
Today the federal budget is running at a 6 percent surplus, compared with a 1.2 percent deficit in 1999 - an achievement in itself after the 1998 harsh economic crisis. The government has introduced a three-year budget planning mechanism, and has adopted a rule directing oil-related tax revenues above a certain oil price to the stabilization fund to reduce its budgetary dependence on oil.

National projects
Significant budget surpluses have allowed the government to start financing its national projects - key areas of public spending that are aimed at producing the greatest long-term effect on the economy and well-being of the population. The projects are being implemented in the four key areas of healthcare, education, housing and agriculture. National-projects financing for 2007 is set at $8.7 billion.

Inflation down, but remains an issue
Inflation has been reduced dramatically to 8 percent (running) in 2007 from 36 percent at the end of 1999, but still remains a very important concern for monetary authorities. In its latest economic outlook, the Russian Ministry of Economic Development and Trade forecasts a decline of inflation to 3 percent per year over the long term, which today appears an extremely ambitious target.

Poverty
The proportion of the population living below subsistence level has fallen to 17 percent in 2007 from 30 percent in 1999. In some regions (Moscow being arguably the strongest example), regional authorities have been playing an important role in raising the living standards of pensioners and other less-wealthy parts of the population. However, with or without the help of the federal center, poverty is being gradually eradicated in Russia.

Unemployment
In 1999, there were 8.6 million people unemployed in Russia, or an unemployment rate of 13.2 percent. By the end of 2006, the number of unemployed had dropped to 5 million, with the unemployment rate falling to less than 8 percent.

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