Russia Economic Structure

The economic structure that exists in the Russian Federation today was created mostly as a consequence of decisions made during the prior economic regime.

The economic structure that exists in the Russian Federation today was created mostly as a consequence of decisions made during the prior economic regime.

For nearly 60 years, the Russian economy operated on the basis of centralized planning where the Russian state government controlled virtually all means of production, investment, production, and consumption decisions throughout the economy. Economic policy was made according to directives from the communist party, which controlled all aspects of economic activity. The State Planning Committee formulated countrywide output targets for stipulated planning periods. Regional planning bodies then refined these targets for economic units such as state industrial enterprises and state farms and collective farms, each of which had its own specific output plan.

Since 1991, under the leadership of Boris N. Yeltsin, the country has made great strides toward developing a market economy by implanting basic tenets such as market-determined prices. Critical elements such as privatization of state enterprises and extensive foreign investment went into place in the first few years of the post-Soviet period.

But other fundamental parts of the economic infrastructure, such as commercial banking and authoritative, comprehensive commercial laws, are still lacking in Russia today, limiting its potential growth and ability to attract and sustain investments.

 

 

Russia Economic Structure: The Road Ahead

Although Russia is well placed in its path to economic growth and development, given the feeble global economy, it needs to take lessons from its 1998 crisis to avoid the pitfalls of debt and balance sheet crises. Russia, an emerging economy, must structure its fiscal policies in line with government policies and the external environment. With its over reliance on energy and oil exports, Russia needs to guard itself from the fluctuating oil prices and the US dollar, and create diversity in its economic structure.

With interest rates set to decline further and bank deposits continuing to grow, Russian financial institutions are also likely to restart their credit facilities and reorganize their consumer and investment banking policies.