By Michael Munger
Things seem to be picking up for Russia, heart of the former Soviet Union and the world’s only third-world superpower.
- This year, using a purchasing power parity basis, Russian GDP stands at $1.287 trillion, or 11th largest in the world.
- Their real growth rate in 2003 was 7.3%. The growth rate has averaged 6.5% per year over the past five years, after the 1998 crisis.
- Since 2000, demand by consumers and investors have been consistently strong. Real fixed capital investments have gained more than 10% per year, on average, over the last four years. Real personal and family incomes have seen increases that average more than 12%.
- Financially, Russia has also moved a long way toward putting its house in order. Its foreign debt has declined from 90% of GDP during the 1998 crisis to around 28%. (The “foreign debt as percent of GDP” figure for the U.S. is 23%, and climbing fast). (data source)
Much of this boomlet is due to increased oil prices, of course. Recently oil has been trading at more than $40/barrel, with the end of July seeing prices of nearly $45. Russia has significant exports, making it the world’s second largest exporter of crude (after the Saudis). These oil export earnings have meant that Russia has increased its foreign reserves from only $12 billion to some $80 billion. Given how soft the ruble has been (often, it has been a non-traded currency), these foreign reserves go a long way toward establishing Russia as a legitimate global economy.
Despite these successes, Russia is still in trouble. Unsolved problems include credible commitments to guarantee private investments, and the survival of democratic institutions. A recent piece by David Storobin, his July 21, 2004 post on The Global Politician, which is the best and most succinct summary of the problems that I’ve seen.