Russia: on the brink of presidential elections on 2 March
- Russians overall priority for 2008 is a strong economic development to promote its geopolitical weight
- In 2007 Russia became the 10th largest economy in the world
On March 2nd the Russians are asked to elect a new president and on the brink of this election the political elite shows what is crucial to them: a strong economy. The Russian Statistical Agency published a first estimate of GDP growth of 8.1 % for 2007, which is higher than the most optimistic predictions. In the future the government will also be stepping up efforts to accelerate the growth of key non-oil & gas sectors, such as the car and aircraft industries. In addition infrastructural expenditures will be further increased to support the development.
10th largest economy in the world
Even if caution is asked for concerning these plans, Russian’s economy is strong. In 2007 the country reached a nominal GDP of € 942 bn, making Russia the 10th largest economy in the world. Drivers of this impressive dynamic were household consumption, which grew by 13.1 % and an investment boom, here especially notable the 21.1 % increase in corporate investment. The strong growth provides ample opportunities also for foreign companies. “In the current phase of development, Russia’s demand for goods from abroad, among them investment goods, is very high”, says Debora Revoltella, CEE Chief economist of UniCredit Group. According to a survey by the Statistical Agency 61 % of interviewed enterprises bought imported equipment in 2007.
2008: Prosperous outlook for Russian economy
The economists of UniCredit Group predict a GDP rise of 6.7 %, an increase of the real wages by 12 % and a rise in household demands by 10.2 % in 2008. The prospects for investment growth in 2008 are still very positive, despite a worsening international context and consequent repricing of risk resulting in higher financing costs. “We expect investment to increase by another 14 %, as with almost 60 % of equipment being more than ten years old, the need for equipment renewals is pressing” so Revoltella.
Presidential elections: political continuity granted
The future configuration of power has become clear soon after parliamentary elections, when President Putin announced his support of Mr. Medvedev as a presidential candidate. Given Mr. Putin’s popularity Mr. Medvedev’s election is almost guaranteed. Furthermore Mr. Putin has agreed to become Russia’s Prime Minister in case Mr. Medvedev wins the presidential elections. This shows that he will continue to play a key role in Russian politics. “International financial markets are likely to react positively to Mr. Medvedev’s victory, says Revoltella. “Moreover, the end of the uncertainty who becomes president should reduce the political risk and minimise struggles between Kremlin clans, and ensure the continuity of the economic policy.”
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