The focal point of the paper is to write a prĂ©cis on the article: “In 1998 Russia was nearly bankrupt. Today it has reserves of $60bn. But its economic future remains insecure” by Andrew Jack and Stefan Wagstyl published in the Financial Times on Aug 18, 2003. This article is a look into the economic aspects of Russia in the context of its foreign debts and the stability of its currency.
It is assumed by economists that the Russian economy was due to collapse. However, from 1998 it has been raising a steady curve in the context of growth. It is found that in the midst of an economic slowdown, the Russian economy is one of the very few national economies that are working out very steadily. There have been a number of reforms after the communist era in Russia, but the bureaucracy remains a powerful institution. It has been reported that about a ten-odd businessperson holds control over more than half of the economy of Russia. The main driving forces are minerals, gas, and oil. The hydrocarbon industry alone accounts for about 15% of GDP. This also adds up to about 55% of the entire government revenue and exports.
However, from the point of view of government, it is a reconstruction time when the economy must be formulated well to sustain for the long term as it is already at risk of losing ground and facing economic ramifications in the near future. As it is even in the midst of a booming economy, it has been reported that Russia has suffered a 2.6 lower growth, and the net amount of growth would hardly reach 5% at the end of this financial year. It should be noted, “Despite a recent increase in the birth rate, inspired perhaps by economic confidence, the 145m-strong population is falling by 600,000 a year. Even with the boost of the past five years, GDP is only 70 percent of the levels of Soviet times.” (Jack and Wagstyl, 2003) This indicates trouble brewing for the future.
To counter this future problem, Vladimir Putin is considering options of more reformations with reduced elements of red tape offices. It is considered that with the motion of the official paperwork reduced and given momentum, the economy is due to speed up also. However, there is a low margin of foreign investments, and there is a very low demand for foreign products other than French wine, Italian fashions, and German cars. Alongside, higher wages are bringing down productivity and profit margins at the same time. Still, at this point in time, the economy remains stable, but if the international oil price were reduced, the major problem would take place. With such a huge percentage of the economy dependent on oil, the economy is sure to collapse with the lower oil price. It would certainly destroy the economy.
The current tension of the Russian economy is the influence of the handful of super-rich classes on the government. They are suggesting to abandon the welfare measures taken by the Putin government to start the growth of the economy and sustain it on a long-termed basis because they are the section of the population who are benefited most from the aspects of stability in Russia. However, Putin is yet to yield anything to them. Putin can gain huge public support if he manages to decentralize the power control of the economy among oligarchs. It is to be seen what step Putin takes to generate sustainability and growth at the same time.
References
Jack, Andrew and Wagstyl, Stefan; 2003; In 1998 Russia was nearly bankrupt. Today it has reserves of $60bn. But its economic future remains insecure; Financial Times; Web.