Russia Economy: Unraveling Russia's Economic Tapestry, From Soviet Legacy to Global Influence

By Fouad Sabry

What is Russia Economy

The economy of Russia has gradually transformed from a planned economy into a mixed market-oriented economy. It has enormous natural resources, particularly oil and natural gas. In 2023, it was the world's 11th-largest economy by nominal GDP, 6th-largest by purchasing power parity (PPP) according to IMF, and 5th-largest according to World Bank. Due to a volatile currency exchange rate, Russia's GDP as measured in dollars fluctuates sharply. Russia was the last major economy to join the WTO, becoming a member in 2012.

How you will benefit

(I) Insights, and validations about the following topics:

Chapter 1: Economy of Russia

Chapter 2: Economy of Brazil

Chapter 3: Economy of Canada

Chapter 4: Economy of Indonesia

Chapter 5: Economy of Kazakhstan

Chapter 6: Economy of Kyrgyzstan

Chapter 7: Economy of Malaysia

Chapter 8: Economy of Pakistan

Chapter 9: Economy of Tanzania

Chapter 10: Economy of Trinidad and Tobago

Chapter 11: Economy of North Korea

Chapter 12: Economy of Ukraine

Chapter 13: Economy of Uzbekistan

Chapter 14: Economy of Vietnam

Chapter 15: Economy of Bolivia

Chapter 16: Economy of Ivory Coast

Chapter 17: Economy of Algeria

Chapter 18: Economy of Belarus

Chapter 19: Economy of China

Chapter 20: Economic history of the Russian Federation

Chapter 21: Economic impact of the Russian invasion of Ukraine

(II) Answering the public top questions about russia economy.

(III) Real world examples for the usage of russia economy in many fields.

Who this book is for

Professionals, undergraduate and graduate students, enthusiasts, hobbyists, and those who want to go beyond basic knowledge or information for any kind of Russia Economy.

• Language: English
• Publisher: One Billion Knowledgeable
• Release date: Apr 1, 2024

Book preview

Chapter 1: Economy of Russia

Russia's economy has steadily transitioned from a planned economy to a mixed market one. Russia's WTO membership was approved in 2011.

Russia has a huge proportion of the world's natural resources, which is a significant factor in determining its economic activities. Russia's family income and wealth inequality is comparably high.

The economy of Russia is turbulent. Its institutional context has shifted from a communist command economy to a capitalist market system since 1989. Its industrial structure evolved substantially from manufacturing and agriculture to market services, oil and gas, and mining. Richard Connolly contends that throughout the last four centuries, the Russian economy has been formed by four features that have survived despite political changes. First, the legal system's inadequacy results in the lack of impartial courts and difficult contracts. The second factor is the underdevelopment of modern economic activity, with very primitive peasant agriculture dominating until the 1930s. Third is technical underdevelopment, which was mitigated in the 1920s by borrowing from the West. Fourthly, poorer living levels than Western Europe and North America.

The Soviet Union's economy was regulated by a succession of five-year plans beginning in 1928. In the 1950s, the Soviet Union swiftly transformed from a mostly agricultural country into a significant industrial power. In the 1970s, the Soviet Union was experiencing a period of stagnation. Central planners were overburdened and hampered by the complexities of the contemporary economy and rigid governance. The quantity of choices confronting Moscow's planners grew overwhelming. The onerous processes for bureaucratic administration prevented the enterprise-level unfettered communication and adaptable reaction necessary to address worker alienation, innovation, consumers, and suppliers.

Workers of Moscow Likhachev Automotive Plant, 1963

From 1975 to 1985, corruption and data manipulation were widespread within bureaucrats in order to declare met objectives and quotas, hence aggravating the situation. Beginning in 1986, Mikhail Gorbachev sought to solve economic issues by transitioning to a socialist market economy. Instead of revitalizing the Soviet economy, Gorbachev's Perestroika initiatives led to a process of political and economic collapse that ended in the dissolution of the Soviet Union in 1991.

Russian inflation rate 1993-2022

Main Directorate of the Bank of Russia for the Central Federal District

Russia's GDP by purchasing power parity (PPP) in 1991–2019 (in international dollars)

Russia experienced a major transition after the fall of the Soviet Union, shifting from a centrally planned economy to a globally linked market economy. Corrupt and chaotic privatization procedures transferred significant state-owned enterprises to oligarchs with political connections, resulting in highly concentrated stock ownership.

The name shock treatment was used to Yeltsin's goal of radical, market-oriented change. It was based on the Washington Consensus principles, IMF guidelines, and a group of leading American economists, including Larry Summers.

The 1998 Russian financial crisis was precipitated by difficulties in collecting government taxes amid a falling economy and reliance on short-term borrowing to pay budget shortfalls.

Russia was the biggest borrower from the International Monetary Fund in the 1990s, receiving $20 billion in loans. The IMF was criticized for funding so much, since Russia implemented few of the promised changes and a significant portion of the funds might have been diverted from their original purpose and involved in illicit capital outflows..

Oil prices in the 2000s

The depreciation of the ruble, which made local manufacturers more competitive domestically and globally, contributed to Russia's rapid recovery from the financial crisis of August 1998.

Between 2000 and 2002, key pro-growth economic changes included a comprehensive tax reform that established a 13 percent flat income tax; and a thorough attempt at deregulation that helped small and medium-sized businesses.

Changes in the credit rating (foreign) of Russia, Standard & Poor’s

Russian banks were affected by the worldwide credit crunch in 2008, but there was no long-term damage as a result of the government and central bank's prompt and aggressive reaction, which insulated the banking sector from the consequences of the global financial crisis.

Russian bonds, Inverted yield curves to control inflation throughout their respective conflicts (Russo-Georgian War), Russo-Ukrainian Conflict, 2022 Invasion of Ukraine by Russia

Twenty year bond

Ten-year bond

One-year bond

3 month tenancy

Russia's oil exports fueled a dramatic rise in living standards between 2000 and 2012, with real disposable income increasing by 160 percent. Political unrest in neighboring Ukraine exacerbated the uncertainties and discouraged investment.

Countries by natural gas proven reserves (2014), based on The World Factbook data.

Russia has the greatest reserves in the world.

The United States, the European Union, Canada, and Japan slapped sanctions on Russia in response to its annexation of Crimea in March 2014 and its participation in the continuing War in Donbas. This precipitated a drop in the Russian currency and fueled worries of a financial catastrophe in Russia. Russia retaliated by imposing penalties on a number of nations, including a one-year embargo on food imports from the European Union and the United States.

According to the Russian economic ministry in July 2014, the GDP grew by 1 percent in the first half of 2014. The ministry anticipated growth of 0.5% during 2014.

Heavy sanctions imposed in 2022 in response to the Russian invasion of Ukraine are anticipated to cause a severe economic downturn.

per capita gross domestic output (PPP) in April 2022

Russia's unemployment rate since the dissolution of the Soviet Union

Russia's inflation rate from 2012 until 2022

The following table shows the most important economic indicators from 1980 to 2022. Inflation below 5% is in the green.

Greater-income regions in Russia have higher levels of air pollution. Despite the fact that income may have been higher in certain places, income inequality was shown to be larger. Higher economic inequality within an area is connected with greater pollution, suggesting that it is not just the volume of money that counts, but also its distribution.

In 2016, Russia was anticipated to have a budget deficit of $21 billion.

The Government of Russia created the Stabilization fund of the Russian Federation as part of the federal budget on January 1, 2004 in order to balance the budget if the price of oil decreases. The Stabilization fund was separated into two portions on February 1, 2008. The first is a reserve fund equivalent to 10 percent of GDP (10 percent of GDP is around $200 billion at present), which was to be invested similarly to the Stabilization Fund. The second is the Russian Federation's National Prosperity Fund. Sergei Storchak, Deputy Minister of Finance, anticipated that it would reach 600–700 billion rubles by February 1, 2008. The National Prosperity Fund will be invested in riskier securities, such as foreign company stock.

Corruption Perceptions Index by Transparency International, 2019

Transparency International's Corruption Perceptions Index for 2020 ranked Russia 129th out of 180 countries, lowest among European nations.

A proportional representation of Russia exports, 2019

Until 2022 Russia was a key oil and gas supplier to much of Europe

Rosneft headquarters on the bank of the Moskva River, Moscow

The mineral-rich Ural Mountains as well as the massive fossil fuel (oil, gas, and coal) and wood deposits of Siberia and the Russian Far East make Russia wealthy in natural resources, which account for the majority of its exports. Specifically, oil and gas exports continue to be the primary source of hard money.

Numerous sources characterize Russia as an energy powerhouse; Russia is also a prominent exporter and producer of gold and minerals. Russia is the greatest diamond-producing country in the world, generating an estimated 33 million carats in 2013, or 25 percent of the worldwide output worth over $3.4 billion, with state-owned ALROSA responsible for around 95 percent of total Russian production.

A combine harvester in Rostov Oblast

Russia's agricultural industry produces around 5 percent of the country's overall GDP, but employs only about 1/8 of the entire labor force.

Russia's industrial growth per year (%), 1992–2010

President Vladimir Putin meeting with workers of Kalashnikov Concern (2016)

A view of T-14 Armata tank

The Russian defense industry is a strategically significant and major employment in the nation. Russia has a big and sophisticated weapons industry that is capable of creating and producing high-tech military equipment, such as fighter jets of the fifth generation, nuclear-powered submarines, guns, and short- and long-range ballistic missiles. It is the second-largest exporter of weaponry in the world, behind the United States.

The Sukhoi Superjet 100 is one of Russia's most recent civilian aviation products.

In 2018, the regional passenger aircraft was ordered around 280 times by different airlines and leasing businesses.

Aircraft manufacture is a significant industry in Russia, employing over 355,300 people. The Russian aviation industry delivers globally competitive military aircraft such as the MiG-29 and Su-30, while new projects such as the Sukhoi Superjet 100 are anticipated to revitalize the civilian aircraft market. In 2009, United Aircraft Corporation firms delivered 95 new fixed-wing aircraft, including 15 civilian variants, to its clients. In addition, around 141 helicopters were created by the industry. It is one of the most science-intensive high-tech industries and employs the most trained workers. The production and value of military aircraft greatly exceeds other defense industrial sectors, and aviation items account for more than half of the country's exports of armaments.

Lada is a brand of AvtoVAZ, the largest Russian car manufacturer in the Russian automotive industry.

Aurus Senat, NAMI's latest armoured limousine project

Automobile manufacturing is a large business in Russia, employing over 600,000 people directly, or 1 percent of the country's total employment. Russia manufactured 1,767,674 automobiles in 2018, ranking thirteenth among auto-producing countries and accounting for 1.8% of global output. The top local brands for light vehicles are AvtoVAZ and GAZ, while KamAZ is the market leader for heavy vehicles. Eleven international automakers operate in Russia or are in the process of developing factories there.

Russia is undergoing a microelectronics renaissance with the rebirth of JCS Mikron.

Russians spent sixty percent of their pre-tax income on shopping in 2013, the highest proportion in Europe. After the privatization of state-owned Soviet housing, many Russians no longer pay rent or mortgage payments because they own their own homes. International investors and customers from the rising middle class favored shopping complexes. In the vicinity of major cities, 82 malls, including a few extremely big ones, have been constructed. A grocery store is a common anchor business in a Russian shopping mall.

Russia's telecommunications sector is expanding and maturing. Russia has an estimated 4,900,000 broadband connections as of December 2007. Tom Phillips, chief government and regulatory relations officer for the GSM Association, remarked in December 2006::

Russia has already reached more than one hundred percent mobile penetration due to the popularity of wireless communications among Russians and the government's efforts to develop a market-driven, competitive mobile industry.

The Trans-Siberian Railway, The world's longest railway line, as seen across the coast of Lake Baikal.

The Russky Bridge in Vladivostok is the longest cable-stayed bridge in the world

Russian Railways, a state-owned enterprise, controls the majority of rail transportation in Russia.

The Port of Novorossiysk

The Russian construction sector saw its most challenging year in over a decade in 2009. The 0.8% decline reported by the sector for the first three quarters of 2010 seemed amazingly healthy in compared to the 18.4% decline recorded the previous year, and construction businesses were far more hopeful than in previous months. The most successful construction companies signed billion-dollar contracts and planned to hire additional people and acquire new construction equipment. The recession helped to highlight the government's significance to the building industry.

According to the Central Bank of Russia, as of the end of 2013, 422 insurance firms operate in the Russian insurance market.

The concentration of insurance business is significant across all major segments except compulsory motor third party liability market (CMTPL) [ru, As of 2013, the top ten employers charged 58.1% of total premiums without mandatory health insurance (CHI).

In 2013, the Russian insurance industry exhibited a considerable pace of expansion.

In 2013, the total amount of premiums charged (excluding CHI) was RUB 904.9 billion (increase on 11.8 percent compared to 2012), The entire amount of claims paid is 420.8 billion rubles (increase on 13.9 percent compared to 2012).

The ratio of premiums to GDP (excluding CHI) climbed to 1.36 percent in 2013 from 1.31 percent in 2012.

The premium proportion of household expenditure rose to 1.39 percent.

46.5 percent of all claims paid on the market without CHI, inadequate growth relative to 2012.

2013 had a 0.1% rise in the number of policies compared to 2012, 139.6 million policies.

Despite the fact that relative indicators of the Russian insurance market have returned to pre-crisis levels, the recovery is mostly due to the expansion of life insurance and accident insurance; the contribution of these two market categories to premium growth in 2013 much exceeded their market share. As previously, banks often employ life insurance and accident insurance as an addendum to a credit contract to protect creditors from the risk of credit default in the event of the borrower's death or incapacity. The expansion of these lines is directly related to the rise in consumer loans, as the population's overall credit liabilities climbed by 28 percent to RUB 9.9 trillion in 2013. In addition, the ratio of net life and accident insurance premiums to GDP remained the same as in 2012, at 1.1%. Thus, excluding banking lines of business, the Russian insurance industry has been in a state of stagnation for the last four years, with premiums to GDP ratio net of life and accident insurance remaining at 1.1% since 2010.

Russia has more academic graduates than any other country in Europe.

(And the global leader in the proportion of the population with an associate degree or higher: 54 percent, compared to 31% in the UK Meanwhile, Offshore programming is the section of the IT market with the highest growth