Annals of Resurgent Russia – CIA World Factbook 2008

The 2008 version of the CIA World Factbook has been published. While the demographic data has not been updated, new economic estimates have been published for 2007.

Firstly, let’s take a look at the basics. Russia’s GDP is now estimated at 2076bn $ in 2007, up from 1723bn $ in 2006. This is not just because of Russia’s 7.4% growth and dollar depreciation, but because estimates for it have been revised upwards – apparently it has taken a hint from the World Bank, which has used new data on international price comparisons to slightly improve Russia’s position and massively downgrade (by 40%) China and India.

This also means that in purchasing power parity terms, Russia’s GDP is now the seventh largest in the world, moving up two places since 2006 by overtaking Italy and France. Now, it is within shooting distance of the UK (2147bn $). Assuming, like the Economist Intelligence Unit, that Russia will grow by 6.7% and Britain by 1.9% in 2008, this means Russia will overtake Britain in 2008. Assuming a conservative 6% Russian growth and 2% German growth, Russia should overtake Germany in 9 years from 2007 (in 2016), thus fulfilling predictions that it will become the world’s fifth largest economy by 2020 some four years earlier. It also means Russia’s PPP GDP as a percentage of the world’s increased from 2.65% in 2006 to 3.15% in 2007. All this is also evidence that the ‘economic catch-up’ forces I described in Towards a New Russian Century? are in gear.

Since Russia’s population decreased about 0.15% in 2007 (according to my calculations), this means that GDP per capita growth was even more impressive than the growth in absolute GDP. This figure increased from 12,100 $ in 2006 to 14,600 $ in 2007 (again, mostly due to the World Bank’s revision of prices). This means that Russia has overtaken Malaysia (14,400 $), Chile (14,400 $) and Argentina (13,000 $) in its GDP per capita. It is also significantly ahead of Mexico (12,500 $), Romania (11,100 $), South Africa (10,600 $), Brazil (9,700 $), Turkey (9,400$) and Ukraine (6,900 $), and head and shoulders above China (5,300 $) and India (2,700 $). It does, however, have some catching up to do with Poland (16,200 $) and the developed world in general, for instance the European Union (32,900 $). Nonetheless, the fact that in one year Russia’s GDP per capita has transformed from being 86% to 90% of Poland’s and from 41% to 44% of the EU’s illustrates that things are moving in the right direction.

When discussing Russia’s economic growth in a developmental context we must emphasize the fact that unlike most other countries, it is on the background of a decreasing population. Take the example of India. Although its growth rate since 2000 was about 7-8%, in contrast to Russia’s 6.5%, taking into account its 1.5% population growth rate means that in fact, if anything, its real GDP per capita has been in relative decline to Russia’s – and this despite the fact its absolute figure is 20% that of Russia’s. The same can be said for many Latin American and Southeast Asian countries. Perhaps I’ll write in more detail about this sometime later.

Growth at 7.4% per annum was higher than 2006’s 6.6%, and as in the year before driven primarily by growth in consumption and increasing investment, not in the ‘oil bubble’ as so many ignorant Russophobes would have it. This is made all the more impressive by the fact the labor force fell from 73.9mn to 72.4mn, implying productivity per economic participant grew by well over 8%.

The Gini index (a measure of inequality) was estimated to have increased from 40.5 to 41 from 2005 to 2006. While this is a high figure, it is lower than in the US and far from apocalyptic (click on the link). The investment rate as a percentage of GDP increased from 18.2% to 19.4%; while still quite a lot lower than optimal, this is nonetheless comparable to countries like Poland (21.8%), Chile (21.0%) and Malaysia (20.2%) – all of which have demonstrated respectable growth – and higher than in fellow BRIC member Brazil (17.9%).

The federal budget had 342bn $ in revenues and 244bn $ in expenditure out of a total market-exchange rate GDP of 1251bn $, up from 222bn $ and 157bn $ out of 733bn $ in 2006, respectively. There are several caveats, however. While spending seems to be much lower than in France or the UK, a) this only accounts for federal expenditures – in fact, total public spending is around 31.9% of GDP for 2007 and b) this is as measured by MER GDP. Converting to PPP and accounting for regional expenditures will bring the total up to 662bn $. This does not include the fact that many of Russia’s poorer citizens (i.e. on state salaries) get benefits like transport subsidies, which aren’t directly measured in state spending.

Oil production increased from 9.4mn to 9.68mn barrels per day from 2005 to 2006, but domestic consumption grew from 2.5mn to 2.9mn barrels per day (leaving no room for increases in exports). Production increased by a similar amount this year (about 3%). This again demonstrates how the Russian economy could not be said to be dependent on increasing oil production for most of its growth.

Finally, FOREX reserves rose from 315bn $ to 470bn $ from 2006 to 2007 year end. There is also an interesting statistic that the value of Russia’s publicly-traded shares was 1322bn $ in 2006 – making it comparable in absolute size to France, Germany and Switzerland.

Comments

  1. birth rate to equal death rate by 2011:http://en.rian.ru/russia/20080123/97616414.html

  2. MHN Parée says:

    Now only for some Global warming and de-NATOisation.We’ll see who rules the roost then, BTW, look at the sub-prime mortgage doodle-doom.

  3. @djp,This just goes to show how Western doom-mongering about imminent Russian demographic meltdown is just so much hot air.In fact, we mentioned this on our first post here, Reading Russia Right (http://darussophile.blogspot.com/2008/01/editorial-reading-russia-right.html).”The demographic Russian Cross is being flattened by two other forces – rising birth rates and immigration…the trend towards higher birth rates is real and can probably be sustained. This is because the desired amount of children generally doesn’t equal the amount people are willing to have due to economic considerations, according to this study; presumably, continued economic progress will raise birth rates up to 2015.”And we’ll keep repeating it until the Russophobes take note.@mhn parée,Erm, I’m not really sure what you’re talking about here.

  4. Absolutely right about Birth-rates.As people’s incomes, confidence and securities rise, so will the desire to have extended families, as was the pattern of the Russian Empire, before the Bolsheviks came.Global warming will hopefully be a boon to Russia, if and when it happens. The only BIG BAD BULLY is NATO, souring the party for most, except for those across the Atlantic!

  5. Oleg Nevestin says:

    Great job,guys.

  6. Oleg Nevestin says:

    Your number of Russia’s nominal GDP of $733B is for 2005. In 2006 it was in the neighborhood of $1trillion(you probably consulted CIA site, which often uses outdated info). As for Poland, Russia lags it by only one year. I think it makes Poles so nervous that they are sending feelers to Moscow for better relations. This year Russia will end up with GDP per capita at between $16000 and $17000 at purchasing parity, and at around $11000 nominal. Pretty exceptional performance by Putin, I’d say.

  7. conservative 6% Russian growth and 2% German growth -Actually the GDP Growth is much larger, because it grows as per the Per capita incomes * Population figures.Russia has the 2nd largest millionaire population, which is surprising considering its large Public sectorPotentially, even in this raw material Dependant economy, RF is probably the largest Economy in Europe and among the top five in the world, real GDP wise, i.e. GDP BY ppp or will be shortly, given its momentum and Commodity prices!However, to stay there and advance further, it has to overcome its OIL/GAS dependency!The root question -Can RF survive and grow / sustain W/O its Oil/Gas?

  8. @oleg,”In 2006 it was in the neighborhood of $1trillion(you probably consulted CIA site, which often uses outdated info).”Well spotted. Thanks. CIA just prints GDP estimates for the year before and I must have consulted the 2006 version and not noticed it was for the year 2005.”As for Poland, Russia lags it by only one year.”Of course, if you add in the grey economy, Russia might well have a higher GDP per capita than Poland already.”I think it makes Poles so nervous that they are sending feelers to Moscow for better relations.”I think it’s just that the new administration, while far from being Russophiles, are at least rational (in contrast to Kazynski and Co.) and would like to maintain a working relationship (e.g. Poland lifts opposition to Russia joining WTO and OECD, Russia allowed Polish meat imports).”Pretty exceptional performance by Putin, I’d say.”While Putin has probably been a beneficial influence on the economy in general, it is a fallacy to attribute economic dynamics to a particular occupant of the Presidency at any one time.@mhn,”Russia has the 2nd largest millionaire population, which is surprising considering its large Public sector”Firstly, it is Moscow which has the second largest number of billionaires (amongst cities). Russia is third as a country. 1) USA (432)2) Germany (55)3) Russia (53)4) India (36)5) UK (29)6) Turkey (25)7) Japan (24)8) Canada (23)9) Hong Kong (21)10) Brazil, Spain, China (20)11) France (15)12) Saudi Arabia (13)13) Australia (12)14) South Korea (10)15) Mexico (10)(http://aydin.net/blog/2007/03/10/worlds-billionaires-by-country/)In numbers of millionaires, it lags the major European countries (UK, Germany, France, etc).”Russia has the 2nd largest millionaire population, which is surprising considering its large Public sector”Russia’s public center (gov’t, central and local, in total accounts for about 30% of GDP) is not particularly large by international standards.”However, to stay there and advance further, it has to overcome its OIL/GAS dependency!The root question -Can RF survive and grow / sustain W/O its Oil/Gas? “Is, it can. The hydrocarbons sector is growing slowly to stagnating currently, and has been for the last three years.The Russian dependency for growth on oil/gas is a Russophobe myth which has been debunked numerous times on this blog.

  9. Oleg Nevestin says:

    stalker, I guess I’ll have to respectfully disagree about Putin’s role in Russia’s economic development. If Yukos was sold to Exxon, if hydrocarbon taxation was low as Russia’s oil barons wanted and were getting until Putin changed the equation, if StabFond had not existed or was spent on populist promises, if foreigners were allowed into strategic sectors of the economy, if Chechnya was permitted to morph into separatism across the whole country, I’m not sure we’d be talking about this incredibly positive transformation. It’d be a basket case of the worst sort. Having said that, I understand where you’re coming from. In countries with well established economies very little depends on a head of state. One day, it’ll happen in Russia. Probably very soon. But I don’t think Russia is there yet. Judging by Putin’s consent to the Prime-Ministership, he apparently doesn’t think so either. Still, I’d like to compliment you on this great blog of yours. Impressive work.

  10. MHN Parée says:

    Russia is third as a country. – Outdated DATA, Please know your facts!Russia today has 105 Billionaires – http://www.guardian.co.uk/world/2008/feb/19/russiaEven in this present form and type of Economy, Russia will easily attain the 4/5th status in the World and become the largest Economy in Europe in 2/3 years, if not already. For I believe in REAL TERMS, Russian Market is the biggest in Europe easily!Yandex it and see the results!Question is, how to sustain that figure and if possible improve -That depends , primarily, on -Demographic improvements, Diversification, tax reforms, building world-wide BRANDS (comparable to Coke, Macdonald’s etc), Infrastructure development and very very important – “Building a thoroughly Professional army” – For more Russia becomes MORE OF a threat for the NEO-COLONIAL WEST, the more West shall try to needle Russia, see the latest Kosovo incident!Russia , in my view, should aim to have the Highest Per capita Income in the world!After all, didn’t someone say – “To dream ain’t criminal”

  11. stalker says:

    @Oleg,Thank you for the compliment.I agree that Putin has played a positive role in ensuring fiscal discipline and reasserting state power, an order of magnitude better than the coterie around Yeltsin managed. Nonetheless, the facts are that a) Russia would have recovered practically under any government in the 2000’s (note how the whole post-Soviet space, even ‘basket cases’ like Moldova or Georgia have grown rapidly since around 2000) and b) Putin’s record, while good, is not unblemished – for instance, there still haven’t been any significant moves to lighten the regulatory burdens of starting up and running a small business, and the size of the bureaucracy has mushroomed.@mhn,Russia today has 105 Billionaires – http://www.guardian.co.uk/world/2008/feb/19/russiaOK, I was wrong on that. Sorry. Outdated info.Even in this present form and type of Economy, Russia will easily attain the 4/5th status in the World and become the largest Economy in Europe in 2/3 years, if not already. For I believe in REAL TERMS, Russian Market is the biggest in Europe easily!Not quite. In real terms Russia is comparable with the UK and well behind Germany, although the trend is strongly upwards.Demographic improvements, Diversification, tax reforms, building world-wide BRANDS (comparable to Coke, Macdonald’s etc), Infrastructure development and very very important – “Building a thoroughly Professional army”demographic improvements = ongoingdiversification = ongoingtax reforms = I agree, its time to do away with the flat taxworldwide brands = will come with development (although I certainly hope Russia doesn’t produce the likes of McDonalds or Coke – see the health article http://darussophile.blogspot.com/2008/01/editorial-annals-of-demographic.html)infrastructure development = ongoingprofessional army = slow but moving somewhere (length of service has already been reduced to 1 year)Russia , in my view, should aim to have the Highest Per capita Income in the world!I can agree with that. I certainly won’t mind Russia having the world’s higher per capita income, well, as long as working hours, quality of life, etc, also remain reasonable.

  12. MHN Parée says:

    For I believe in REAL TERMS, Russian Market is the biggest in Europe easily!-When talking in real terms, I mean the consumer market, which I strongly suspect, RF is the primary in Europe,Anyways,one other thing is that as MUCH AS POSSIBLE, Political and Business interests must be separated.Russia must transform, if not already, into a complete CAPITALIST SOCIETY and COUNTRY, where biz is run on demand/supply formula and politics is run on give some/lose some formula.Every drop of oil/every ounce of gas must be sold deriving the maximum market value, domestic or externally.For every concessions given, especially to the fair weather friends/relatives/transit countries, something must be secured…After all, neither money or sweat comes cheap!

  13. ivanivanov333 says:

    Actually, 28% of Russian economy is shadow, therefore the actual ppp adjusted gdp per capita is 40% larger and is $20,400. Nominal GDP in 2007 can be computed by taking GDP in rubles provided by the Russian bureau of statistics and dividing it by the exchange rate at the end of the year. This number is 1.41 trillion dollars. Taking into account the shadow part, we get 1.96 trillion dollars nominal. The corrected gdp growth rate in 2007 was 8.1%. If it persists through the Medvedev term, at the end of 2012 it will be $30,110 per capita (ppp) in today’s dollars, which is about the same as UK, France, Italy or Germany.

  14. ivanivanov333 says:

    Actually, 28% of Russian economy is shadow, therefore the actual ppp adjusted gdp per capita is 40% larger and is $20,400. Nominal GDP in 2007 can be computed by taking GDP in rubles provided by the Russian bureau of statistics and dividing it by the exchange rate at the end of the year. This number is 1.41 trillion dollars. Taking into account the shadow part, we get 1.96 trillion dollars nominal. The corrected gdp growth rate in 2007 was 8.1%. If it persists through the Medvedev term, at the end of 2012 it will be $30,110 per capita ppp, which is about the same as UK, France, Italy or Germany.

  15. MHN Parée says:

    at the end of 2012 it will be $30,110 per capita (ppp) in today’s dollars, which is about the same as UK, France, Italy or Germany.No reason why it shouldn’t be ?But innovation is the key to higher achievements!