Current State Of The Russian Economy

It is important that we look at the current state of Russia's economy to see how it is performing after all of these sanctions. According to FocusEconomics, Russia's economy is doing just alright as of now. They received a surge of income from hosting the world cup earlier this year, but this is balanced out by new sanctions. Oil prices are on the rise, which means so is Russia's economy. Their unemployment rates have hovered around 5% for some time and don't seem to show any sign of changing soon. However, their GDP has slowly been falling from 2. 296 trillion in 2013 to 1. 578 trillion in 2017. Ultimately, the political climate surrounding russia has made it very unappealing despite rising oil prices. Not to mention that the United States has just surpassed Russia to become the number one oil producer in the world. Certainy the United States is a safer investment than Russia.

There are many challenges facing Putin right now in regards to proactively managing the economy. The most obvious is volatile oil prices. As we've seen in history they can go wildly up, and crash right back down. There is also continued limited foreign investment, a hangover from action in Crimea and Ukraine. Not to mention the rampant corruption, which putin has invited back into russian politics due to the way he is ruling. As mentioned earlier, perhaps the Achilles heel of the russian economy is the lack of economic diversity, entrepreneurship and innovation due to the dominance of state-owned entities. (not sure how to embed)Yukos, then one of Russia’s largest companies, was arrested on tax evasion charges. The company was subsequently broken up and its assets obtained by government-owned oil firms. Estimates indicate that state-owned enterprises (SOEs) now account for anywhere between 25 and 70 percent of the country’s GDP. 42. 5 percent of all procurement contracts awarded by government-owned businesses were allocated without any competitive procedure taking place. Sheltered from market forces, Russia’s SOEs have become breeding grounds for corruption and inefficiency. This discourages entrepreneurs, both Russian and those based elsewhere, from doing business in the country. For that to occur, Russian citizens may have to wait for a seismic political change, the likes of which have not been seen since the year 2000.

Another major challenge facing Putin and his sporadic economy is unfavorable demographic trends of an aging, shrinking workforce and population. Russia's population has been on the decline for a couple years now. This means the age of the average Russian citizen is going up, which in turn means that there will be less people to pay into government funded programs for them. Because of this, Putin is raising the retirement age for men and women, to keep them working longer, pumping money back into the economy, and keep them off government programs.

Alexei Kudrin, Russia’s minister of finance between 2000 and 2011. “After Kudrin’s resignation in September 2011 and Putin’s return as president in May 2012, the direction of economic policy has been less consistent and, crucially, has failed to address the country’s longest-held problem. ”