Russian Economy



Russian Government expects that average GDP (gross domestic product) growth this year will come to an approximate result of 6.8 percent. This corresponds more or less to the average growth rates the Russian economy has seen over the last five years. Per capita GDP comes to around $4,000 this year. This is more than double the result for 2002 and more than triple that of 1999.

Fixed capital investment in 2004 was up by more than 10 percent - a little less than last year but still not a bad result. Our imports of goods increased by almost 25 percent. Russia has had a record trade surplus of almost $80 billion over recent years as we have been exporting almost twice more than we import. Russian exports have increased not only in terms of value but also in terms of physical volume. The country's gold and foreign currency reserves have increased by almost 70 percent and are now approaching the $120-billion mark. This is a record result not only in the history of the Russian Federation but also in that of the Soviet Union.

One important fact to note is that Russian gold and foreign currency reserves now exceed the size of its state foreign debt for the first time. This means that Russia is now a net creditor. This economic growth has helped raise people's real incomes, that is real incomes not counting inflation and price rises. Real incomes have risen by 9 percent and pensions have increased by approximately five percent. Wages, according to various calculations have increased by somewhere from 10-12.5 percent.

Unemployment is down and the unemployment rate is now around 7.4 percent. In absolute terms this still represents a large number of people - 5.5 million - and this is, of course, an issue that will require the government's ongoing attention.

The situation has been quite good in the area of state finances. Russia has had a federal budget proficit for the fifth year in a row now. Russia's stabilization fund has now reached a total of more than $20 billion. At the same time, state foreign debt has decreased since 1999 and as a share of GDP has fallen from almost 60 percent to 20 percent.

One of Russia's achievements this year has been that the world's leading ratings agencies have given Russia an investment-grade rating. These assessments do fully reflect the real economic situation. In previous years, our country received around $4 billion a year in direct investment, but in 2003 that figure was up to $6.2 billion and this year it comes to around $10 billion.

This, of course, is still not enough, but there is a definite positive trend at work here.

These results will all enable Government to move on to the next stage of resolving social issues. The minimum wage is set to rise from January 1, 2005, from 600 roubles to 720 roubles. This will lead to a corresponding 20-percent wage increase for all public sector workers at all levels. The minimum wage is set to rise by a further 11 percent to 800 roubles from October 1, 2005. Public sector wages will also rise by 11 percent. In nominal terms, we have planned to raise public sector wages by a third in 2005 with inflation of 8.5 percent, which will result in a wage increase of around 22.9 percent in real terms. The minimum wage should rise to 1,100 roubles by May 2006, which represents an increase of around 83 percent over 18 months.

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