Comments to the publication “Economic Statistics”

It should be noted that the average annual rates of Russia’s economic growth from 1999 through 2008 constituted about 7% against the previous year (see Fig. 1). On the whole, this dynamics, obviously, is determined by the termination of the economic slump by the crisis 1998 year. This fact is due to restructuring of the economy resulting from transition from command to market oriented economy, Ruble devaluation in autumn 1998, high and growing prices on the raw materials and energy resources. Fig. 1 demonstrates high rates of growth of Russia’s economy during last years except 2008–2010.

 
Fig. 1. GDP Growth Rates (in % to the previous year) and real price of Brent (doll/brl), 1999–2010.
Source: IMF (World Economic Outlook Database), Rosstat.

Sustainable economic growth in Russia in 2005-2007 was ensured by expansion of both external and internal markets. If the dynamics of external demand was affected by the favorable situation on world fuel and raw materials markets, the expansion of domestic market was determined by the impact of increasing business activity (with the higher-than-anticipated growth of investment with respect to the dynamics of final consumption) and increasing purchasing power of the population with an increase in money income.

Thus, in 2005-2007 growth was due to growing capital stock and labor resulting from investments. Export revenues due to high oil prices determined economic growth over these years. For example, according to our calculations due to high growth of oil prices since 2004, the share of market conditions in the GDP growth rates went up to 77.6% of actual GDP growth rate in 20051 . Demand growth in the economy and inflow of resources in the economy become major channels via which the price growth on exported products impacts economic growth, increasing its production capacity.

According to our calculations in 2008-2010 growth of structural component in the GDP growth rates remained unchanged (prevailing under average longstanding foreign economic conditions) and decrease of the GDP market conditions component. Having said that over this period the impact of government policy, business community and population environment, among other, negatively affected Russia’s economic growth rates. This outcome, in our view, seems quite logical, given the negative expectations both of investors (especially foreign) and the public about the effects of the crisis for the Russian economy, as well as anti-crisis measures of the RF Government, not all of which were provided in a timely manner2 .
 
The results described above confirm the fact that the Russian economy is still highly dependent on the global markets, as evidenced by high proportion of market component of the economic growth of Russia during rising oil prices, and low proportion of market component, which is true at the downturn in economic activity and decline in oil prices. Such dependence, in our opinion, represents a serious threat to economic development and calls for public policies aimed at improving the sustainability of economic growth in Russia.

М.V. Kazakova – Candidate of Sciences (Economics), Head of Economic Development Issues Department

1 In detail please see: Kazakova M.V., Sinelnikov-Murylev S.G., Kadochnikov P.А. (2009). Analysis  of Structural and Market Fluctuations Component of the Tax Burden in Russian Economy // Working Papers IEP No 129 (http://www.iep.ru).
2 In detail about mesures please see: Russian Economy in 2009. Trends and Prospects. (Issue 31) (2010). Мoscow: IEP (http://www.iep.ru ), pp. 85-88.