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Working paper

The economic development of Russia: between state control and liberalization

15 ottobre 2008

The Russian economy reached the lowest point of its post-communist slump in 1998, when the state defaulted on debt and was forced to devalue the rouble. After that, economic life in Russia got better. Between 1998 and 2007 the Russian economy grew at an average annual rate of 7.0%. Russia’s leaders are now confident and believe that Russia is economically “sovereign” and can fend for itself.

The aim in this report is to assess that economic performance, identifying both strengths and weaknesses, and to look ahead at prospects over the next five years or so.

This involves, first, a review of macroeconomic development in Russia under Putin in comparative perspective, with some consideration of the sources of the growth we have seen; an account of trends in foreign trade and a closer look at the role of oil. In the second section of the report it is the role of economic policy that comes under scrutiny. The third section is a review of prospects. This is an informal projection based on some key numbers, derived from the Russian government’s strategies both for the economy as a whole and for the energy sector in particular. In the final section is offered a brief look at western economic policies as they affect Russia: are we helping or hindering our own interests so far as Russia is concerned?

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