The excessive dependence of the political system by the personal image of Putin, could cause an intense instability, mainly in sight of the foreseen elections for 2008 in which Putin cannot be a candidate.
The long period of absence of an alternative policy could have negative consequences in the economic growth.
The relations of Russia with EU and USA will continue to be contradictory due to numerous variations in various sectors among which the dissatisfaction manifested by Russia concerning the enlargement of NATO and EU and the competition for the influence in the countries of CIS (Commonwealth of Independent States). However, the contemporary economic circumstances render as necessary the mutual cooperation. The economic policy continues to present contradictory indications to the investors, either local or foreign. The Government should continue its efforts for the maintenance of the control in the natural resources sector (mainly for petroleum and natural gas) and at the same time try to create a larger space for the opening of the market in other fields. The period under consideration the petroleum price should be gradually reduced, however, remained in high levels.
The delayed structural and institutional reforms hinder the economic growth. More specifically, the deficient reform of the financial system prevent the sufficient distribution of the reserves towards the productive investments. Limits respecting the productive capacity, the clear delay of the institutional dealings and the impacts of the ruble depreciation contribute to the slow economic growth.
The growth rate of the GDP will continue to be characterized by the increases petroleum prices and will reach about 5% during the period 2007-2011.
Despite, the decreased foreign investments, the improvement of the favourable conditions respecting the entrepreneurial activities has brought a raise to the inflows derived by the foreign direct investments (FDI), in any case though they will not surpass the 12% of the GDP before 2011, a percentage still lower than the real capacity.
The risk of the inflation’s increase should cause a more rational fiscal policy. However, the inflation that depends also on the economic growth, could only be partially limited. The current transaction should register a surplus during the entire period of 2007-2011. However, the profound dependence of Russia on the commodities international prices’ instability could be a risk source.
Provision of the economic course
The transition from a centralized system to a more enlarged one has destabilized the economy of Russia and has affected the validity of the data. The distributed phenomenon of tax evasion in the private sector, has determined the growth of the so said unofficial production, which according to some sources currently represents the 40% of the Russian GDP. Recently, the National Statistic Service RosStat introduced the methodological modifications in order to harmonize the official statistics with the international standards.
The sectors of services and commodities, of a low importance during soviet era, has known a significant growth during 90s. During the period 2000-05 services represented 57% of the GDP in relation to 1990.
The industrial sector is still oriented towards heavy industry, as a result of the past economic policy. According to official data, in 2004 (recent data available by RosStat) fuel and energy represented about 17% of the industrial production and the sector of metallurgy (ferrous, non ferrous products) about 19%. With the energy to represent the 8% and the food products the 16%, it is clear that the products of the manufacture industry (in particular high tech) and the consumer goods constitute still a small part of the Russian economy.
The financial system of Russia is occupied by great dimensions enterprises, while SMEs are not so developed (10-15% of the Russian GDP in relation to 50% or more that is registered in average to the other economies of the market).
Contribution of various sectors in GDP formation ( composition %)
Source: EIU, Economist Intelligence Unit, Country Report June 2007