Russia Integrates : Deepening the Country’s Integration in the Global Economy
Russia’s early development successes resulted from undertaking ambitious structural reforms, a commodity cycle boom, and taking steps to promote greater economic openness, including becoming a member of the WTO in 2012. Between 2000 and 2012, Russi...
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| Format: | Report |
| Language: | English |
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World Bank, Washington, DC
2021
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| Online Access: | http://documents.worldbank.org/curated/en/921181607959469524/Russia-Integrates-Deepening-the-Country-s-Integration-in-the-Global-Economy http://hdl.handle.net/10986/34994 |
| Summary: | Russia’s early development successes
resulted from undertaking ambitious structural reforms, a
commodity cycle boom, and taking steps to promote greater
economic openness, including becoming a member of the WTO in
2012. Between 2000 and 2012, Russia’s gross domestic product
(GDP) rose on average by 5.2 percent a year, slightly below
the 5.8 percent average for all upper middle-income
countries over the same period, but above the 2.9 percent
average for the global economy as a whole. Per capita GDP in
real terms grew by about 80 percent between 2000 and 2012
(from 14,615 US Dollars to 26,013 US Dollars in purchasing
power parity (PPP), 2017 prices). Since 2003, Russia has
been the sixth largest economy in the world in PPP terms,
moving up from ninth position in 2000. A favorable external
environment and strong macroeconomic fundamentals
facilitated inclusive growth throughout the 2000s.
Structural policies were also key drivers of growth,
reflecting the impact of reforms and structural changes
launched during this time. Breaking the 2000s decade into
early and late periods reveals that structural policies were
the key driver of growth in the early 2000s (2000 to 2005).
With better terms of trade, the contribution of the external
environment to growth improved significantly from 2005 to
2010. Prudent macroeconomic management and booming oil
revenues facilitated fiscal surpluses, a reduction in
external debt, and a rise in reserves. This helped Russia to
respond with strong countercyclical policies to the
recession during the 2008–09 Global Financial Crisis,
limiting its impact on the economy. Meanwhile, potential
growth estimates for Russia show that it peaked before the
Global Financial Crisis and has since continued to decline.
The estimated potential growth rate — the rate at which the
economy can grow when labor and capital are fully employed —
was 3.8 percent in 2000–09 and 1.7 percent in 2010–17.2 This
deceleration was due to a slowdown of productivity growth
and a shrinking potential labor force, rather than a
shortfall in capital accumulation. In 2014, the economy
suffered from adverse oil price shocks and the imposition of
economic sanctions, which led to Russia becoming more
insular and less integrated globally. One manifestation of
this has been reduced foreign direct investment (FDI)
inflows since 2014. Although economic activity in Russia has
continued to recover from the 2015-16 recession, potential
growth has continued to decline. A weakness in potential
growth is not specific to Russia. Potential growth has been
adversely affected in both advanced economies, where it was
evident even before the Global Financial Crisis, and
emerging markets and developing economies, especially since
2010-12. However, a faster-than-average decline in Russia’s
potential growth has raised concerns about its medium-term
prospects and the risks of stalled convergence in GDP per
capita with advanced economy levels. |
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