What Is The Economy Of Russia Based On – On August 9, 1999, Putin was brought out of obscurity and appointed Prime Minister. In six months he would be president. Kremlin.ru
Last week, President Vladimir Putin celebrated his 20th anniversary in office. Let’s look at the numbers to see how the country has changed under his leadership.
What Is The Economy Of Russia Based On
On August 9, 1999, Putin was brought out of obscurity and appointed Prime Minister. Just six months later, Boris Yeltsin stepped down as president and Putin seamlessly took his place.
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That was always the plan. Russia was still suffering from the effects of the collapse of the Soviet Union and the financial crisis of 1998, which led to Russia pumping about $40 billion in GKOs, or federal treasury bonds, into Russia, which were taken over by foreign investors, and that most of them collapsed big banks.
Russia was under siege from what scholars Barry Ickes and CliffordGaddy called “the virtual economy.” The payment system had collapsed as a result of the hyperinflation that swept the country after Russia’s first post-Soviet prime minister, Yevgeny Gaidar, liberalized prices and barter.
GDP growth was negative for a decade, except for a few months in 1998. The government was in a permanent financial crisis. Poverty rose as life expectancy and income fell. Our “desperation index” (the sum of inflation and unemployment plus the proportion of people living in poverty) had reached the astronomical level of 1440, ten times worse than any other country in the former socialist bloc
However, Putin was incredibly happy. The 1998 crisis was caused by the collapse of oil prices following an Asian financial crisis a year earlier. But in 2000, oil prices began to rise from their lows of $10 a barrel and rose inexorably to a peak of around $150 over the next decade. The flood of petrodollars made rebuilding Russia much easier, but to his credit, Putin didn’t waste the money, but used it to build a new country.
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Putin was responsible for the first systematic attempt to reform the Russian economy. In 2000, he launched the so-called Gref-Plan (“Program for the socio-economic development of the Russian Federation for the period 2000-2010”), after the then Minister of Economy and current CEO of Sberbank, German Gref. the crisis broke out in 2008, but the plan was abandoned when it was only 30% complete. There was a lot of theft during Putin’s first term, but real progress was made, putting the Russian economy well ahead of the rest of the Commonwealth of Independent States (CIS).
The numbers paint a clearer picture of mixed results, as the task of transforming Russia into a modern and efficient market economy is far from complete. Below we select the main indicators and divide them into three broad categories: macroeconomic, social and quality of life.
The Russian economy is large, but the collapse of the Soviet Union reduced its value and share of the world economy. Most of this collapse occurred under Yeltsin’s watch, but as the graph shows, Russia quickly recovered its share of the world economy from 2% to 4% after Putin came to power. The global financial crisis of 2008 put an end to this process, and the Russian economy clearly began to stagnate after 2013, a slowdown that was exacerbated by the collapse of oil prices in 2014.
In the decade from 1999 to 2008, Russian GDP grew by 94% and GDP per capita doubled. The value of the economy rose from 210 billion dollars in 1999 to a peak of 1.8 trillion dollars in 2008. The crisis pushed the value back to 1.2 trillion dollars. and with the current stagnation, the economy is not expected to return to $1.8 trillion until 2023.
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Looking at Russia’s share of global GDP, Russia is back where Putin started in the late 1990s. Russia’s role in the world economy peaked in 2008, but now Russia risks falling behind as the rest of the world is growing faster than Russia.
There was no growth under Yeltsin. The economy has stagnated for a decade. But that changed suddenly and dramatically after Putin took power. One of the benefits of the 1998 crash and devaluation was that it re-monetized the economy and ended the “virtual economy”. When people started using cash and petrodollars again, the economy boomed. GDP growth was 10% in 2000 as the economy recovered from the recession, a record that has not yet been broken. The two crises of 2008 and 2014 were major shocks to the economy.
The growth boom before 2008 mainly reflects rising living standards and consumption due to high oil prices. After 2014, consumer demand stagnated and fixed investment was also negative as the Russian economy entered a post-oil boom phase in which it faced strong structural growth. problems
Russia is now in the fourth phase of the post-Soviet transformation (first: the collapse of Yeltsin in the 1990s; second: the oil boom of the 1990s; third: economic stagnation from 2013 after the exhaustion of the oil model), which Putin finds . itself in May- decrees and the 12 national projects. They are trying to create a new economic model based on investing in the supply rather than consuming demand that drove the growth of the 1990s.
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The first was the Gref plan, which was launched shortly after he took office and ended the 2008 crisis.
Next came the concept of the long-term socio-economic development of the Russian Federation until 2020, but it was never implemented due to the global crisis.
In January 2011, Putin presented a new 2020 strategy to the Higher School of Economics and the Presidential Academy of National Economy and Public Administration, which led to the so-called first round of May 2012 decrees, which became the 7th year. .
The result of the first round of decrees in May did little to reverse the downward trend towards stagnation, so it was replaced in May 2018 by a new round of decrees, which increased with the 12 national projects that the latest version of the transformation plan . the economy of Russia.
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Russia is blessed with almost every mineral and natural resource known to mankind. Oil and gas exports are the most important, and the government was able to generate revenue from this business, which financed much of the transformation.
Putin’s rise to power coincided with rising resource revenues in the early 2000s. However, resource revenues have declined in recent years after peaking in 2006-2008. This means that the pie is shrinking and internal conflicts between different factions are increasing.
The IMF estimates that the size of Russia’s shadow economy is now 34% and has changed little over the past 20 years. However, the idea of a shadow economy made little sense under Yeltsin, as most economic activities were carried out through barter and tax payments were therefore irrelevant, further fueling the ongoing crisis. Since Putin came to power, the tax authorities have been rationalized and in the last two years, Russia has undergone a tax revolution with significantly improved efficiency.
There is still a large part of the informal economy in Russia. The state tried the practice of paying wages in envelopes and paying taxes and social security contributions of workers in the informal sector, without much success.
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The flood of petrodollars that arrived in the 1990s transformed Russia’s finances. When the crisis broke out in 1998, Russia had only $10 billion in international reserves, enough to finance two and a half months of imports, less than economists believe is necessary to ensure the stability of the economy . National currency
But during the 1990s, the government wisely eliminated excesses in various emergency funds. Even after the stagnation that occurred since 2013, the state carefully maintained these high reserves in anticipation of further shocks and recently in anticipation of further sanctions.
Reserves peaked in 2013, about a year before the annexation of Crimea and the start of the conflict over Ukraine. In the following years, they fell due to interventions by the Central Bank of Russia (CBR) to support the ruble, a policy it abandoned at the end of 2014, and spending from the Ministry of Finance’s reserve fund to cover budget deficits
The decline in Russia’s federal external debt relative to its reserves is so extreme that a logarithmic scale must be used to capture the change: the external debt has gone from 1,243% of reserves in 2000 to 8.9 % fell today.
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Russia’s international reserves have exceeded the federal and central government’s foreign debt since 2005, and this year the reserves cover Russia’s entire foreign debt dollar for dollar in cash. Debt reduction was a central part of Putin’s fiscal policy. One of the first things he did as president was to repay the IMF loans from the 1990s in early 2005.
In the 1990s, the state lived off the income from gas exports. Gazprom regularly received “special” tax payments to avoid a budget crisis. However, the sharp devaluation of the ruble in 1998 changed the oil business overnight, making it largely profitable. The most important oil companies
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