1999-2005 Overview: Year Out, Year In

Russia's GDP expanded at an average 6.8% through 1999-2004 driven first by the improved competitiveness of domestic producers after the 1998 devaluation and then by the extraordinary strength of international commodity prices. Yet, unlike some oil export-dependent economies, Russia has sought to put its petrodollars to work, seen in the 9.1% average increase in fixed investment over the five years. Meanwhile, Russia's service sector, also riding the commodity-driven growth, expanded rapidly, leading to an increase in small- and medium sized businesses (which were also boosted by political attention to the sector through a reform program).

Latest Macroeconomic Developments in Russia

1. Output and Investment

Between 1999 and 2005 the average growth rate was about 7 percent. In 2005 GDP growth was 6.4%. In recent years investment amounted to about 19% of GDP, which is low compared to other rapidly growing emerging markets. To sustain growth at the current rates and enhance the productive capacity of the economy, Russia would need to increase the growth rate of investment to 15-20 % a year.