BizAims

Since the turn of the century, rising oil prices, increased foreign investment, higher domestic consumption and greater political stability have bolstered economic growth in Russia. The country ended 2007 with its ninth straight year of growth, averaging 7% annually since the financial crisis of 1998. In 2007, Russia's GDP was $2.076 trillion (est. PPP), the 7th highest in the world, with GDP rising 8.1% from the previous year. Growth was primarily driven by non-traded services and goods for the domestic market, as opposed to oil or mineral extraction and exports. Approximately 12.5% of Russians remained below the federally-designated poverty line in 2007, though this is significantly down from 40% in 1998 at the worst of the post-Soviet collapse. The average salary in Russia was $540 (about $920 PPP) per month in August 2007, up from $65 per month in August 1999.

Russia has the world's largest natural gas reserves, the second largest coal reserves and the eighth largest oil reserves. It is the world's leading natural gas exporter and the second leading oil exporter. Oil, natural gas, metals, and timber account for more than 80% of Russian exports abroad. Russia is also considered well ahead of most other resource-rich countries in its economic development, with a long tradition of education, science, and industry. The country has more higher education graduates than any other country in Europe.

In the first half of 2007, foreign investment in the Russian economy doubled year-on-year, reaching $60.3 billion. Russia has a flat personal income tax rate of 13 percent. The federal budget has run surpluses since 2001 and ended 2007 with a surplus of 6% of GDP. Oil export earnings have allowed Russia to increase its foreign reserves from $12 billion in 1999 to some $470 billion at the end of 2007, the third largest reserves in the world. The middle class has grown from just 8 million persons in 2000 to 55 million persons in 2006. Poverty has declined steadily. A principal factor in Russia's growth has been the combination of strong growth in productivity, real wages, and consumption. Despite the country's strong economic performance since 1999, however, the World Bank lists several challenges facing the Russian economy including diversifying the economy, encouraging the growth of small and medium enterprises, building human capital and improving corporate governance.