The Essential Features of Russian Economy

Any country’s economy has its own peculiarities which determine its features, structure, progress trend and global economy ranking.

The Russian economy is characterized as follows:

1. It is a large-scale economy due to its territory (6,6 million square miles or the largest country in the world), population (about 143 million people on the 1st October 2013 — the ninth largest in the world), as well as its mighty labour, natural, sci-tech, sociocultural and industrial resources.

Nevertheless, as for the proportion in the global GNP Russia was driven back during the crisis of the 90ies. Though in 1970 Russia produced 8% of the GNP, its amount decreased to 5,5% in 1990 and declined to 2,7% in 2000. According to the World Bank the proportion of Russian economy in the global one comprised 4,1% at the end of 2012. In 2012 Russia was the 55th country in the list referring to the Human Development Index. At the same time, the country has got considerable opportunities for growth.

2. The wealth and variety of natural resources including lands, minerals, forests, and water. Russia takes one of the leading positions if not to say is ranked #1 internationally concerning its area size of agricultural lands (540 million acres), forests (1,912 million acres), water resources (4310 cubic kilometers of river runoff per year), assured resources of oil and gas, coal, ferrous and some non-ferrous metal ores, mining and chemical materials. Russian climate and weather conditions regretfully disturb the efficient use of natural wealth: about 70% of Russian areas are occupied by Russia’s High North. It demands extra expenses on land reclamation, essential services, and transport system.

3. The sociocultural variety distinguishes Russia and makes an impact on its social and economic relations. The residents belonging to more than a hundred nationalities and multiple ethnic groups of different confessions (Orthodox Christians, Muslims, Buddhists, etc.) inhabit Russia’s land area. This variety should be taken into account when planning a socially oriented economic policy.

4. Russia’s economy has obtained its prominent mixed character since the reforms of the 1990s. In 2000 the number of citizens engaged in the economy were 64,6 million of people, 38,1% of them were involved in the public and civic sectors, 45% were in the private sector, 14,1% were in the mixed sector, 0,8% were in social and religious organizations, 2% were in foreign enterprises or joint ventures with foreign companies.

Consequently, there are several basic paradigms in the economic structure: capitalistic, small-scale (i.e. small private businesses, farmers, shuttle traders), public and mixed.

One of the unique features of Russia is a considerable ratio of natural patriarchal relationship in its economy, represented prevalently by individual farming. In 2011 about 40% of rural commodities were manufactured by individual farming mostly for own usage. Under those circumstances, the basic objective of the state economy regulations is creating such conditions that each economic structure could function in its niche the most effectively.

5. The sharp differentiation of the economic performance and social modernization of 83 sub-federal units of the Russian Federation which increased in the 90s is inherent to the modern economy today.

In 2010 the Sakha Republic (Yakutia) exceeded the Adygei Republic by a ratio of 277 to one in its area size. The investments in fixed capital in Tyumen Region exceeded those in Evenki Autonomous Area almost 5900 to one.

Moscow exceeded 70 times Evenki Autonomous Area in fixed assets value and 3600 times in retail turnover. Similarly, it exceeded Ingushetia by a ratio of 16,3 to one in average monthly income per person and by a ratio of 338 to one as for the amount of gross regional product.

Due to such a variety of development conditions and economic potentials of sub-federal units of the Federation the regional policy takes center stage. It should be focused on the systematic convergence of social progress and economic advancement levels in different country-subdividing regions.

6. The modification of the economic advancement model, change-over to open economy have led to Russia’s integration into the international economy.

During the period of the centralized planned economy, the monopoly of the external trade protected Russian enterprises and internal market against the competition of foreign dominant companies and transnational corporations.

Currently, customers are free to make their choice of local or foreign products. Besides, the flows of commodities between the former republics of the Soviet Union have obtained features of the external trade. As a result, the flow of foreign goods has streamed into the Russian market, driving out domestic goods producers and intensifying crisis.

Import ratio in retailment market resources increased from 14% in 1991 to 54% in 1996. After the devaluation of the state currency in 1998, it decreased to 36%, though in 2010 it raised again (climbing above 40%).

Russia is growing market and despite of difficulties in international politic still there are a lot of opportunities for doing business in Russia for foreign companies. Knowing particularities of tax system, custom regulation, labor regulation, finance and banking system, accounting and tax compliance in Russia will help you to develop your business in Russia, whether big or small.