Recent Economic Trends In The Russian Economy

1987 words - 8 pages

The Russian economy made fairly good progress in the year 2001 and 2002. In 2001 Russia's GDP increased by 5% and in 2002 it increased by 4.1%. Even though the percentage increase in the GDP in 2002 was less than that of the year 2001, the advancement was fairly satisfactory. Comparatively, the average percentage increase in GDP in developed countries was 1.5% and in the United States was 2.3 %. 2002 was the fourth year in a row that Russia observed a steady improvement in its economy after its dismal performance in the year 1998 thus bringing in a sense of stability and building investor confidence.The Russian stock market in 2001 did exceedingly well and achieved a growth rate only second highest to Argentina in the world. Besides the stock market, there were other economic indicators that showed positive trends in the year 2002. There was a 17.4% increase in real wages; inflation for the year was 15%, lower than 2001, exports were on the rise and investment grew. "At the beginning of 2003, the Chicago Stock Exchange resumed trading in ruble exchange rate futures in response to heightened interest among foreign investors in the Russian financial markets and economy as a whole." In view of the performance of the Russian economy and in order to develop a mutually beneficial relationship, Russia was given market economy status in 2002 by both the European Union and the United states. This new recognition is an evidence of Russia's progress and a step toward increasing corporation with the European Union and the United states, especially since the United States and the countries from the European Union trade extensively with Russia. For the last two years the U.S has been a leading foreign direct investor in Russia.Although there has been progress in foreign investment in Russia, the overall investment has been relatively small. Investors still perceive the Russian market as a very difficult one. The infrastructure in places other than the main Russian cities is far from desired and is one of the main deterrents for both domestic as well as overseas businessmen to invest in the country. Moreover crime and corruption play a dominant role in Russian business and security has always been a cause for concern inspite of an ongoing attempt by the government to clean up this menace. Terrorism is another factor that has caused damage to the image of Russia. There have been several terrorist attacks in the main cities in the last few years. The most prominent attacks being the bombings that destroyed several residential blocks and killed nearly 300 people. The other recent attack was the one by Chechnyan rebels in a theatre located downtown Moscow. In this attack nearly 150 people died. Such acts of terrorism killing innocent civilians have frightened investors and foreign multi national companies.These factors besides the Russian government's inconsistency with their trade policies over the years have had an impact on overall investment. The Russian...

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