Executive Briefings

Russia's Economy Just Isn't that Solid

The commodity-driven wealth of Russia masks continued financial weakness in Russia, which suffered a major currency crisis just ten years ago. In industry after industry, Russia has failed to create world-class competitors. American consumers, for example, could spend a whole day shopping and purchase only goods made in China. It would be hard, however, to find any consumer products manufactured in Russia. The $1.5tr economy simply lacks diversity: Calculations by Alfa-Bank, a Russian lender, show the oil and gas sector accounts for about 20.5 percent of Russia's overall GDP, roughly the same level as in 2000. According to IMF and World Bank estimates, oil and gas generate more than 60 percent of Russia's export revenues and account for 30 percent of all foreign direct investment in the country. The problem for Russia's resources-driven boom: Commodities fluctuate. Even with the rise of China and India, prices for what Russia sells are not going to be high forever.
Source: Fortune

The commodity-driven wealth of Russia masks continued financial weakness in Russia, which suffered a major currency crisis just ten years ago. In industry after industry, Russia has failed to create world-class competitors. American consumers, for example, could spend a whole day shopping and purchase only goods made in China. It would be hard, however, to find any consumer products manufactured in Russia. The $1.5tr economy simply lacks diversity: Calculations by Alfa-Bank, a Russian lender, show the oil and gas sector accounts for about 20.5 percent of Russia's overall GDP, roughly the same level as in 2000. According to IMF and World Bank estimates, oil and gas generate more than 60 percent of Russia's export revenues and account for 30 percent of all foreign direct investment in the country. The problem for Russia's resources-driven boom: Commodities fluctuate. Even with the rise of China and India, prices for what Russia sells are not going to be high forever.
Source: Fortune