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Russia Business Forecast Report Q2 2008Published by: Business Monitor International Published: Mar. 3, 2008 - 58 Pages Table of Contents
AbstractExecutive summary: Putin To Remain in ControlWe believe that 2008 will be a pivotal year for Russia’s economic and political outlook. Beginning this year, we expect Russia to shift its core economic priorities away from macroeconomic stabilisation and toward domestic investment and improving standards of living. This will have the effect of furthering the trend of declining current account and fiscal surpluses and moving economic growth away from the trade surplus to increasing domestic demand. The likely election of Dmitry Medvedev as Vladimir Putin’s successor to the presidency will only serve to reinforce the government’s economic policy agenda. Despite the formal change in leadership in the Kremlin, we expect Putin will maintain a prime decision-making position in the new government as prime minister. Moreover, Medevedev himself has shown little inclination on the campaign trail through Q108 to deviate substantially from the existing government’s platform. It is all but certain that Dmitry Medvedev will be Russia’s next president when Vladimir Putin steps down from the post in March. Though Medvedev remains largely an unknown quantity from a policy perspective, his close association with Putin reveals that the government’s direction is unlikely to be substantially altered from the succession. Indeed, with Putin likely to take over the role of prime minister in the new government, and with the pro-Putin United Russia party dominating the December 2007 parliamentary elections, his control of the country’s federal institutions has never The Russian macroeconomic environment is set for some major changes going forward. First, we expect the country’s current account surplus to flip into deficit by 2010. At the same time, the fiscal surplus will be eliminated. A core implication of this is that the upside pressures on the rouble will be substantially mitigated, opening the door for the currency to fully float within three years. From overall economic perspective, we are already beginning to see the shifts in Russia’s growth dynamics, which will underpin these transitions. Gross fixed capital formation and domestic consumption levels continue to rise while net exports fall, helping to bolster the economy at a time of external sector weakness. These trends will help to keep the Russian economy expanding at above % for the foreseeable future. Russia’s business environment is hampered by poor infrastructure, rising state protectionism in the energy industry and weak institutional development, which has contributed to an endemic corruption problem and limited impartial judicial oversight. There are signals that the government is taking some of these issues seriously, but we do not expect any major changes to occur within the short term. The size of the country and the limited capacity of government institutions mean that any policy initiatives will take years to have any meaningful effect. Get Full Details About This Report >> |
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