Analysis of Russian Economy

Analysis of the article

“ It's official: Russia is heading into recession”

By,

Utsav Gautam

MS in Finance, Fall 2014

Background:

Russia, also known as the Russian Federation, is a country in Northern Eurasia- It is the largest country in the world in terms of area and is the world’s ninth most populous nation. The Russian Economy is classified as a high-income mixed economy. Russia has undergone significant changes since the collapse of the Soviet Union- transitioning from a globally-isolated, centrally-planned economy to a more market-based and globally- integrated economy, but continuing to exist as a partially reformed, statist economy with a significant concentration of wealth in officials' hands. Market reforms in the 1990s privatized most of the Russian industries and agriculture, barring the energy and defense- related sectors.

Russian economy is the sixth largest in the world by PPP (Purchasing Power Parity). Russia distinguishes itself from the other major economies of the world in as it relies heavily on energy revenues to propel growth. The country has a plethora 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. [1][2]

Russia has a large and advanced arms/ammunition industry, capable of designing and manufacturing high-tech military equipment. The value of Russian arms exports grossed

$15.7 billion in 2013- second only to the USA. [3] Between 2000 and 2012, Russia's energy exports fuelled a rapid growth in living standards, with real disposable

income rising by 160%. This amounted to more than sevenfold increase in disposable incomes since 2000. However, these gains have been distributed unevenly as 110

wealthiest individuals were found to own 35% of all financial assets held by Russian household. [4] According...