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Economy of Russia
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Еconomy of Russia is a mixed economy with state ownership in strategic areas of the economy. Market reforms of the 1990s privatized much of Russian industry and agriculture, with notable exceptions in the energy and defense-related sectors.

Russia is unusual among the major economies in the way it relies on energy revenues to drive growth. The country has an abundance of natural resources, including oil, natural gas and precious metals, which make up a major share of Russia's exports. As of 2012 oil and gas sector accounted for 16% of the GDP, 52% of federal budget revenues and over 70% of total exports.[25][26]

Russia has a large and sophisticated arms industry, capable of designing and manufacturing high-tech military equipment, including a fifth-generation fighter jet. The value of Russian arms exports totalled $15.7 billion in 2013—second only to the US. Top military exports from Russia include combat aircraft, air defence systems, ships, submarines.[27][28]

Russian economy is the sixth largest in the world by PPP.[3] Between 2000 and 2012, Russia's energy exports fuelled a rapid growth in living standards, with real disposable income rising by 160%.[29] In dollar-denominated terms this amounted to more than sevenfold increase in disposable incomes since 2000.[30] However, these gains have been distributed unevenly as 110 wealthiest individuals were found to own 35% of all financial assets held by Russian households.[31] Since 2008 Moscow has been repeatedly named the "billionaire capital of the world" by Forbes.[32][33]

According to the IMF, the Russian economy was already in recession from early 2014 mainly as a result of the 2014 Crimean crisis and the subsequent capital flight.[34] But this turned out to be false and the IMF revised it's rhetoric to close to being in recession and a forecast of 0.2% growth in 2014 and 1.0% through 2015.

Soviet economy

By the 1970s the Soviet Union entered the Era of Stagnation. The complex demands of the modern economy and inflexible administration overwhelmed and constrained the central planners. The volume of decisions facing planners in Moscow became overwhelming. The cumbersome procedures for bureaucratic administration foreclosed the free communication and flexible response required at the enterprise level for dealing with worker alienation, innovation, customers, and suppliers. During 1975–85 coruption and data fiddling became common practice among bureaucracy to report satisfied targets and quotas thus entrenching the crisis. Since 1986 Mikhail Gorbachev attempted to address economic problems by moving towards a market-oriented socialist economy. Gorbachev's policies had failed to rejuvenate the Soviet economy, though. Instead, Perestroika set off a process of political and economic disintegration, culminating in the breakup of the Soviet Union in 1991.
Transition to market economy (1991–1998)
Russian economy since fall of the Soviet Union.

Following the collapse of the Soviet Union, Russia had undergone a radical transformation, moving from a centrally planned economy to a globally integrated market economy. Corrupt and haphazard privatization process turned over major state-owned firms to politically connected "oligarchs", which has left equity ownership highly concentrated.

Yeltsin's program of radical, market-oriented reform came to be known as a "shock therapy". It was based on the recommendations of the IMF and a group of top American economists, including Larry Summers.[36][37] The result was disastrous, with real GDP falling by more than 40% by 1999, hyperinflation which wiped out personal savings, crime and destitution spreading rapidly.[38][39]

The majority of state enterprises were privatized amid great controversy and subsequently came to be owned by insiders[40] for far less than they were worth.[36] For example, the director of a factory during the Soviet regime would often become the owner of the same enterprise. Under the government's cover, outrageous financial manipulations were performed that enriched a narrow group of individuals at key positions of business and government.[41] Many of them promptly invested their newfound wealth abroad producing an enormous capital flight.[42]

Difficulties in collecting government revenues amid the collapsing economy and a dependence on short-term borrowing to finance budget deficits led to a 1998 Russian financial crisis.
Recovery and growth (1999–2008)
Oil prices in the 2000s

Russia bounced back from the August 1998 financial crash with surprising speed. Much of the reason for the recovery was devaluation of the ruble, which made domestic producers more competitive nationally and internationally.

The three years from 2000 to 2002 were characterized by pro-growth economic reforms including a comprehensive tax reform, which introduced a flat income tax of 13%; and a broad effort at deregulation which improved the situation for small and medium-sized enterprises.[43]

Between 2000 and 2008, Russian economy got a major boost from rising commodity prices. GDP grew on average 7% per year.[38][44] Disposable incomes more than doubled and in dollar-denominated terms increased eightfold.[30] The volume of consumer credit between 2000–2006 increased 45 times, fuelling a boom in private consumption.[45][46] The number of people living below poverty line declined from 30% in 2000 to 14% in 2008.[44][47][48]

Inflation remained a problem however, as the central bank aggressively expanded money supply to combat appreciation of the ruble.[49] Nevertheless, in 2007 the World Bank declared that the Russian economy achieved "unprecedented macroeconomic stability".[50] Until October 2007, Russia maintained impressive fiscal discipline with budget surpluses every year from 2000.[43]
2009–present


Russian banks were hit by the global credit crunch in 2008, though no long term damage was done thanks to proactive and timely response by the government and central bank, which shielded the banking system from effects of the global financial crisis.[51][52][53] A sharp, but brief recession was followed by a strong recovery beginning in late 2009.[38]

After 16 years of negotiations, Russia's membership to the WTO was accepted in 2011.[54] In 2013, Russia was labeled a high-income economy by the World Bank.[55]

Russian leaders repeatedly spoke of the need to diversify the economy away from its dependence on oil and gas and foster a high-technology sector.[56] In 2012 oil, gas and petroleum products accounted for over 70% of total exports.[26] This economic model appeared to show its limits, when after years of strong performance, Russian economy expanded by a mere 1.3% in 2013.[38] Several reasons have been proposed to explain the slowdown, including prolonged recession in the EU, which is Russia's largest trading partner, stagnant oil prices, lack of spare industrial capacity and demographic problems.[57] Political turmoil in neighboring Ukraine added to the uncertainty and suppressed investment.

According to the IMF, the Russian economy was already in recession from early 2014, mainly as a result of the 2014 Crimean crisis and the subsequent capital flight.[58] But this turned out to be false and the IMF revised it's rhetoric to close to being in recession and a forecast of 0.2% growth in 2014 and 1.0% through 2015.[59]

According to the Russian economic ministry, GDP growth in the first half of 2014 was 1%. The ministry expects growth of 0.5% for the entire 2014.[60]

Currency and central bank

Russian ruble is the unit of currency of the Russian Federation. It is also accepted as legal tender in Abkhazia and South Ossetia.

Russian monetary system is managed by the Bank of Russia. Founded on 13 July 1990 as the State Bank of the RSFSR, Bank of Russia assumed responsibilities of the central bank following the breakup of the Soviet Union in 1991.[62]

According to the Сonstitution, Bank of Russia is an independent entity, with the primary responsibility of protecting the stability of the national currency, the ruble. It is also chief regulator and a lender of last resort for the banking industry in Russia. Bank of Russia is governed by a board of directors, headed by a governor who is appointed by the President of Russia.[63]

Large current account surpluses caused rapid real appreciation of the ruble between 2000 and 2008. Bank of Russia attempted to combat this trend by aggressively accumulating foreign currency reserves. This was a major contributing cause to relatively high inflation rates during this period. Central bank policy evolved following the global financial crisis. Instead of targeting a fixed exchange rate vs a basket of dollar and euro, Bank of Russia shifted its focus to inflation targeting.[49][64] In April 2012 Russian inflation reached record low of 3.6%.[65]

The Russian Central Bank has been planning to free float the Russian Ruble and has been widening the currency's trading band and expects the ruble to be fully free floating in 2015. However, the ruble has fell significantly since 2013 when the central bank announced the plans. On October 3, 2014 the USD-RUB exchange reached 40.00 Russian Rubles to USD, up from 32.19 Rubles the same time last year, this represents a decline of 24.26%. The Russian Central bank has stated that Russian banks are able to withstand a devaluation of up to 25%-30% in January 2014 when the Ruble has just began its decline, therefore Central Bank intervention may be needed, however plans to free float the currency are still ongoing.[66][67]

Along with a rapid devaluation of the Ruble inflation in Russia has greatly increased. In 2012 Inflation was at one of its lowest points since the fall of the Soviet Union at 3.6%, in October 2014 the rate of inflation was reported to be 8%, although this is well below the 2333.30% inflation rate experienced in 1992