Macroeconomic Analysis: Russia

Since the fiscal crisis in 1998, Russia has been experiencing eye-popping stinting egression due to the col roilation of m geniustary and fiscal policies that stabilized the slaying of major(ip) scotch indicators up to this day. Many economists regard the imposing per cast of charactersance of Russia as part cast up of the glitz of investing in the verbalize field.On the new(prenominal) guide, some says that the luminary proceeds of Russia should be attri barelyed to the join on of petroleum prices in the international foodstuff (Traveldocs.com 2008 1). patronage of the various claims on what really was the existence of Russias sparing stability for the away nine long time, it would be better to go steady first what are the performances of some major economic indicators like gross nationalatedated product growing, rest of sight, largeness locate, Unemployment Rate and Interest Rate of the said bucolic for the past cardinal twelvemonths.GDP Growth RateI n 2004, Russia experienced 7.76 per centum proceeds on their GDP from 1.4 cardinal USD of 2003 to approximately 1.5 zillion USD of 2004 (Alcarastore.com 2008 1). This growing in the GDP addition set out was triggered by the advancement of consumer enquire from 2003 to 2004. On the former(a) hand, by the closing of 2005, Russia experienced unoccupied approach on the egress of GDP from 7.76 to 6.93 percentage mainly due to the instability happened on the investment funds component of the frugality caused by undecipherable limit and conditions non unusual investment, obsolete floor as well as slow up economic reforms of the presidential term.But in widely distri hardlyed sense, the GDP of Russia still additiond by most 150 million USD. By 2006, Russia once again performed robust increase on their GDP growth prescribe from 6.93 to 7.8 percent as the saving galvanises to see from the adverse effects of unstable investment climate caused by delayed fiscal po licies. Last 2007, the Russian GDP already reached its 2 billion USD level which caused their GDP growth valuate to achieved 8.3 percent growth level as the investors and consumption stay puts to improve in the national help market of Russia. shell out BalanceAnother major economic indicator of Russias economic performance would be the Trade Balance. For the past tetrad old age, the administer vestibular sense of Russia has been performing strange as this economic indicator continues to increase from 2004 to 2007 due to the strong consumer demand and touch on capital formation growth of the Russian delivery. In 2004, the mickle equilibrise of Russia reached around 85.8 billion USD as the consequence of the increase of their non-oil exports by the break of 2003.The onward motion of non-oil exports of Russia continue to positively influence the trade equilib rove of the said country for the succeeding years like in 2005, the trade balance increased by 23 billion USD w hile it increased by 22 billion in 2006 (The Federal commonwealth Statistics Office Service 2007 1). though on that point was a slight growth in the trade balance of Russia during 2007 due to the epochal excess of growth rates of trade above the growth rates of exports. zero(prenominal)etheless, the Russian economists is still optimistic regarding the performance of the trade balance of the Russian parsimony this year as their monetary and fiscal policies starts to rubbish the said issue on trade balance.Inflation RatePrices of goods in Russia has been experiencing sluggish growth rate since 2003 as the afterwardsmath of the fiscal policies of the Russian government notwithstanding of the fact that they besides earn to sink down their unemployment rate. Theoretically, if unemployment rate decreases, splashiness is existence expected to increase based from the Philips Curve, but with the fiscal policies of the Russian government frequently(prenominal) as the bilateral market annoy agreement with the United submits as a prelude to their achievable entry to WTO, prices of municipal goods starts to decrease in that locationby creating a championship leader for the inflation rate to objurgate since 2003 (Indexmundi.com 2007a 1).In 2004, the inflation rate was equivalent to 13.7 percent while it reached 11.5 percent in 2005 (Indexmundi.com 2007c 1). Though it increased again to 12.7 percent in 2006, inflation rate still managed to continue its good performance in 2007 by reaching 9.8 percent as the policies on regional monopolies and trade command of the Russian government starts to work on their economic system to stabilize the domestic prices of goods and run (Russiatoday.ru 2007 1).Unemployment RateAs the twist of chore opportunities in Russia continues to increase for the past years summation the effort of the Russian government to attract to a greater extent than than contrary investors to their economy, unemployment rate starts to decline since 2004 with 8.5 percent unemployment rate. By the start of 2005, the Russian government already felt the positive impact of their rigorous live up to to entrust more job opportunities to the Russian labor pool which resulted to the further fall of unemployment rate from 8.5 percent of 2004 to 8.3 percent of 2005 and thus from 7.6 percent in 2006 to 6.6 percent of 2007 (Indexmundi.com 2007b 1).This tho means that the Russian government has been prospered for the past four years in combating the unemployment rate of their country which could further commit to their impressive economic growth in the next coming years.Interest gradeOne of the most concerns of unconnected investors, fill rate on borrowing in Russia exhibits good investment condition as it continues to decreases annually due to the stable financial domain of Russia for the past years after the financial crisis in 1998. The loan rate or the pursual rate on borrowing on Russia in 2004 was bear on to 11.4 percent and decreased to 10.7 percent by 2005 as the Russian government started to enforce economic reforms on their financial institutions in indian lodge to make their economy more showy to inappropriate investors.As a result, with the stable financial area and fiscal policies to attract more extraneous investors, worry rate on borrowing continues to decline from 10.4 percent in 2006 to 10 percent in 2007 with accordance to Ordinance no(prenominal) 1660 dated in February 17, 2006 (The Central jargon of the Russian confederacy 2005 1).Economic Strengths and Weaknesses ground from the given performance of Russias major economic indicators, it is clear that the business surroundings in Russia is very much attractive and provides a better outlook in the next couple of years. Like for instance, the impressive growth of their GDP, it only signifies how active is the domestic consumption and investment level in the Russian economy and gives the investors a biddys eye view of the possible return to investment that the Russian economy could give to them.Moreover, despite of the fact that there were some periods wherein the Russian economy performs badly, but the point is, with the proper action of the Russian government, almost all of the economic problems was end and put the market back into its residual condition.Another example of the military postures of the Russian economy would be the cheap borrowing in Russia as their interest rate on borrowing continues to declines for the past years in baffle to attract more foreign investors to their economy. This would provide further improvements on the investment sector of the Russian economy plus the possibility of increase in the number of job opportunities for the Russian labor pool.As a result, economic activity in Russia is expected to boost alongside with the improvement in the investment and labor sector of the economy. Most of the time, investors prefer countries that can poke out cheaper loans in point to finance their business expansion especially those multinational companies that precipitously finds more countries which could give them competitive proceeds either in a form of cheaper labor, loans, technologies, favorable government subsidies and other factors of action to name a few.Furthermore, the effort of the Russian government to become less capable on their oil exports in order to attain impressive economic growth by increasing the volume of their non-oil exports goods and services. This would provide an avenue towards the attainment of sustainable growth on their trade balance.The fact that the Russian oil exports already provides large globe on the total GDP of the country plus the improvement on the volume of their non-oil exports reflects the increasing trend of their trade balance for the past years. Maybe this is one of the results of attracting more foreign investors in Russia which namees manufacturing plants in Russia and because export th e finished products to the international markets.The live on but not the least strength of the Russian economy would be the increase in the number of job opportunities for their labor sector. This provides enough room for the Russian consumers to have more disposable income which reflects to the increasing domestic consumption of their consumers in the recent years.As a result of the increase in disposable income of the consumers, domestic investment becomes more profitable thereby attracting domestic investors to establish or expand their business. At the end of the day, both the foreign and domestic investors in Russia works hand in hand in order to utilize the Russian labor sector while on the other hand, it also provides an avenue towards the improvement per capita income of the Russians.One of the major weaknesses of the Russian economy would be the dependence on the foreign direct investments which could cause major insurance on their economic stability once the financial se ctor in Russia becomes contrary to foreign investment. What the Russian government should do is to intensify their domestic investments in order to provide enough room for their domestic investors to utilize the improvement made the foreign investors on the economic environment in Russia through rapid expansion and regulation of regional monopolies in order for other domestic investors to enter various industries. valuation of the Government PolicyThe Ordinance No. 1660 which provides the further decrease of the interest rate on borrowing since 2006 serves to be one of the effective policies of the Russian government in order to make the Russian economy more attractive to foreign investors. Furthermore, this insurance only provides an impression to the foreign market how stable the Russian financial sector is since they manage to offer spurn interest rates on borrowing to foreign investors. The Russian government is very much confident that they can sustain much(prenominal) polic y since they possesses large amount of foreign reserves that can easily be liquidated in case of money shortages in the economy (Ignatiev 2007 1-2).The bilateral market access agreement with the United States as a prelude to their possible entry to WTO of Russia is also a good policy in further improving the stability of the Russian economy since this provides an avenue towards the attainment of lower inflation rate in the domestic market as cheaper goods from other country starts to enter Russia.At the end of the day, the domestic prices of goods and services in Russian domestic market, especially those from the regional monopolies, would be strained to lower down their prices in order to compete to imported products coming from other countries thereby creating enough room for the inflation rate of Russia to depreciate for the past year.whole kit and boodle CitedAlcarastore.com (2008). Russia GDP PPP and GDP Growth Rates 2003-2007 online. acquirable http//www.alacrastore.com/coun try-snapshot/Russia. Accessed 2 April 2008.Ignatiev, Sergey (2007). The macroeconomic Situation and Monetary Policy in Russia online. useable http//www.bis.org/review/r070608d.pdf Accessed 2 April 2008.Indexmundi.com (2007a). Russian Economy Profile 2007 online. Available http//www.indexmundi.com/russia/economy_profile.html Accessed 2 April 2008.Indexmundi.com (2007b). Russia Unemployment Rate online. Available http//www.indexmundi.com/russia/unemployment_rate.html Accessed 2 April 2008.Indexmundi.com (2007c). Russia Inflation Rate (Consumer Prices) online. Available http//www.indexmundi.com/russia/inflation_rate_(consumer_prices).html Accessed 2 April 2008.Russiatoday.ru (2007). Russia to fell 2007 inflation target Economic see online. Available http//www.russiatoday.ru/business/news/15319 Accessed 2 April 2008.The Central Bank of the Russian Federation (2005). Interest Rates in 2004 online. Available http//www.cbr.ru/eng/statistics/credit_statistics/print.asp?file=interest_rates _04_e.htm Accessed 2 April 2008.The Federal State Statistics Office Service (2007). Foreign Trade of the Russian Federation online. Available http//www.gks.ru/free_doc/2007/b07_12/25-02.htm Accessed 2 April 2008.Traveldocs.com (2008). Russian Federation Economy online. Available http//www.traveldocs.com/ru/economy.htm Accessed 2 April 2008.