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Russia - Country Profile

Russia ended 2004 with its sixth straight year of growth, averaging 6.5% annually since the financial crisis of 1998. Although high oil prices and a relatively cheap ruble are important drivers of this economic rebound, since 2000 investment and consumer-driven demand have played a noticeably increasing role. Real fixed capital investments have averaged gains greater than 10% over the last five years, and real personal incomes have realized average increases over 12%. Russia has also improved its international financial position since the 1998 financial crisis, with its foreign debt declining from 90% of GDP to around 28%. Strong oil export earnings have allowed Russia to increase its foreign reserves from only $12 billion to some $120 billion at yearend 2004. These achievements, along with a renewed government effort to advance structural reforms, have raised business and investor confidence in Russia's economic prospects. Nevertheless, serious problems persist. Economic growth slowed down in the second half of 2004 and the Russian government forecasts growth of only 4.5% to 6.2% for 2005. Oil, natural gas, metals, and timber account for more than 80% of exports, leaving the country vulnerable to swings in world prices. Russia's manufacturing base is dilapidated and must be replaced or modernized if the country is to achieve broad-based economic growth. Other problems include a weak banking system, a poor business climate that discourages both domestic and foreign investors, corruption, and widespread lack of trust in institutions. In addition, a string of investigations launched against a major Russian oil company, culminating with the arrest of its CEO in the fall of 2003, have raised concerns by some observers that President PUTIN is granting more influence to forces within his government that desire to reassert state control over the economy.


Economic Statistics
Exports : $162.5 billion (2004 est.)
Export
Commodities :
petroleum and petroleum products, natural gas, wood and wood products, metals, chemicals, and a wide variety of civilian and military manufactures
Export
Partner
Netherlands 9.1%, Germany 8%, Ukraine 6.4%, Italy 6.2%, China 6%, US 5%, Switzerland 4.7%, Turkey 4.3% (2004)
Imports Netherlands 9.1%, Germany 8%, Ukraine 6.4%, Italy 6.2%, China 6%, US 5%, Switzerland 4.7%, Turkey 4.3% (2004)
Import
Commodities :
machinery and equipment, consumer goods, medicines, meat, sugar, semifinished metal products
Imports
Partners :
Germany 15.3%, Ukraine 8.8%, China 6.9%, Japan 5.7%, Kazakhstan 5%, US 4.6%, Italy 4.6%, France 4.4% (2004)