The worlds largest country is growing.
Founded in the 12th century, but dominated by the powerful Mongolian, all the way up to the 15th centuries. Then the Principality of Muscovy, was able to emerge and to gradually conquer and absorb surrounding principalities. In the early 17th century, a new Romanov Dynasty continued this policy of expansion across Siberia to the Pacific and the Baltic Sea. It was by Peter I (ruled 1682-1725) renamed the Russian Empire.
The Communists under Vladimir Lenin and Josef Stalin seized power and formed the USSR. The Communist rule strengthened the Russian dominance of the Soviet Union.
The Soviet economy and society stagnated in the following decades until Mikhail Gorbatsjov (1985-91) introduced glasnost (openness) and perestroika (restructuring), but his initiatives released forces that by December 1991 splintered the USSR into Russia and 14 other independent republics. Russia still remains the largest country in the world, almost twice the size of USA or 4 times the size of European Union.
Russia has slowly build a democratic political system and market economy to replace the social, political, and economic controls of the Communist period. Progress has been made on the economic front, and Russia's management of its windfall oil wealth has improved its financial standing.
Wide natural resource base including major deposits of oil, natural gas, coal, timber and many strategic minerals.
Russia ended 2006 with its eighth straight year of growth, averaging 6.7% annually. Although high oil prices and a relatively cheap ruble initially drove this growth, since 2003-04 consumer demand and, more recently, investment have played a significant role. Over the last five years, fixed capital investments have averaged real gains greater than 10% per year and personal incomes have achieved real gains more than 12% per year. The federal budget has run surpluses since 2001 and ended 2006 with a surplus of 7.4% of GDP on a cash basis. Over the past several years, Russia has used its stabilization fund based on oil taxes to prepay all Soviet-era sovereign debt to Paris Club creditors and the IMF.
Foreign debt has decreased to 31% of GDP, mainly due to decreasing state debt, although commercial debt to foreigners has risen strongly. Oil export earnings have allowed Russia to increase its foreign reserves from $12 billion in 1999 to some $315 billion at yearend 2006, the third largest reserves in the world. During Putin's first administration, a number of important reforms were implemented in the areas of tax, banking, labour, and land codes. These achievements have raised business and investor confidence in Russia's economic prospects, with foreign direct investment rising from $14.6 billion in 2005 to an estimated $30 billion in 2006. In 2006, Russia's GDP grew 6.6%, while inflation was below 10% for the first time in the past 10 years.
Non-tradable services and goods for the domestic market, as opposed to oil or mineral extraction and exports, drove growth. Russia has signed a bilateral market access agreement with the US as a prelude to possible WTO entry, and its companies are involved in global merger and acquisition activity in the oil and gas, metals, and telecom sectors. Russia's manufacturing base is dilapidated and must be replaced or modernized if the country is to achieve broad-based economic growth. The banking system, while increasing consumer lending and growing at a high rate, is still small relative to the banking sectors of Russia's emerging market peers.
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