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Economic Development Of Russia

Дата публикации: 04 сентября 2007
Публикатор: Научная библиотека Порталус
Рубрика: RUSSIA (TOPICS) ECONOMY →
Источник: (c) http://russia.by
Номер публикации: №1188911351


In 1991, Russia's parliament enacted legislation aimed at fully privatizing the commercial and service sector by 1994 and placing about half the medium and large companies in private hands by 1995. By the end of 1992, about 6,000 firms had applied to become joint-stock companies, and 1,560 had completed the process; almost one-third of Russia's approximately 250,000 small businesses had been privatized. Housing privatization began late in 1992, and over 2.6 million apartments--about 8% of the total--had been privatized by the end of 1993. In 1996, the government claimed that the nonstate sector produced approximately 70% of gross domestic product (GDP), up from 62% in 1995. Russia's Communist-dominated parliament, however, was quick to criticize the government's privatization efforts which they thought were responsible for the economic decline. In March 1997, over two million people took part in a national strike protesting the economic hardships of privatization and over 100,000 attended rallies in Moscow and St. Petersburg. The government, however, was committed to privatization and largely ignored the parliament and the protests.

During the financial crisis of 1998, Russia became the first modern country to default on its debt. The subsequent collapse of the ruble and investor flight left analysts concerned that Russia would face famine and even governmental collapse. Instead, a period of fiscal restraint restored growth to the Russian economy although it remains vulnerable to sudden fluctuations in the world market. Russia in the early 2000s remained current on its foreign debt; service of the foreign debt amounted to around $14 billion in 2002.

Russia's GDP increased by 4.3% in 2002 over 2001. Lowered inflation and high oil prices fueled that growth. Unemployment and underemployment remain problems, however. In 1998 the government passed an improved bankruptcy code, and in 2001, the Duma passed a deregulation package to improve the business and investment sector. A new corporate tax code went into effect in 2002, lowering the corporate tax rate to 24% from 35%. Cumulative foreign investment increased by 20% in 2002, but was mostly due to increases in loans and trade credits. The banking system is poorly developed, which inhibits economic development. In 2002, the US Department of Commerce designated Russia a "market economy," and the country was invited by the G-7 nations to take part in negotiations, causing the group to be named the G-8.

As of 2006, Russia's reforms had made considerable progress since Vladimir Putin became president in 2000. Progress in such sensitive areas as utilities restructuring and housing reform is slower than in those areas that were targeted by the 2000-02 reform agenda, namely tax reform and deregulation. As of 2006, roughly three-quarters of the Russian economy had been privatized, although the state still held significant blocks of shares in privatized businesses. The large, unwieldy and corrupt bureaucracy remains a problem for reform. Russia ended 2005 with its seventh straight year of economic growth, which averaged about 6.5% annually since the 1998 financial crisis. Russia also improved its international financial position over this period, with foreign debt declining from 90% of GDP in 1998 to approximately 28% of GDP in 2004. Strong oil export earnings allowed Russia to increase its foreign reserves from $12 billion to some $120 billion by yearend 2004. These achievements raised business and investor confidence in Russia's economy, but, in addition to problems already mentioned, the manufacturing base is in serious need of modernization, the banking system is weak, there is a widespread lack of trust in institutions, and underemployment is a severe problem. President Putin by 2006 had taken a number of steps to shore up presidential power, and concerns have been raised that certain forces within the government are looking to reassert further state control over the economy.

Опубликовано на Порталусе 04 сентября 2007 года

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