Issue Overview

In 2012 the Russian Federation saw a change of leadership and restated its position as a global player. It recently joined the World Trade Organization (WTO) and will assume the presidency of the G20 in December 2012. In 2014, Russia will host the Winter Olympic Games and chair the G8.

The Russian economy has recovered from the 2008 crisis, with the country’s GDP growing by more than 4.3% in early 2012. However, the Russian Federation’s continued dependence on natural resources and the volatility of commodity prices hinder its competitiveness and sustainable economic development. The country needs new drivers of growth and economic prosperity to address its demographic and social challenges and to gain competitive edge along with other BRIC countries. Having acceded to the WTO in August 2012, the challenge for the Russian Federation is to use its newfound membership to increase its share of FDI and encourage the growth of small and medium enterprises that would lessen the country’s economic dependency on its hydrocarbon sector. 

The Russian Federation continues to modernize and implement economic and social reforms. Heavy bureaucratic structures, however, limit opportunities for exploring new growth models and innovative approaches to addressing demographic challenges, income inequalities and other social issues, such as pension reform. Corruption at all levels of Russian society continues to hamper the country’s economic development as well as its modernization efforts. Furthermore, economic disparities between its main urban centres of Moscow and St Petersburg and the different regions from Kaliningrad to Kamchatka need to be addressed. The wide range of complex and interconnected challenges will require a holistic approach in the search for solutions. 

Did You Know?

• The Russian Federation recently surpassed Saudi Arabia as the number one oil producing country in the world, providing 12% of the world’s oil production. 
• Foreign investors have rated investment in the Russian Federation as “attractive” by an impressive 75% due to the growth of the Russian domestic market.
• Russia’s public debt to GDP ratio equals about 10% of GDP. However, if anything happened to drive down the price of oil, Russia’s debt to GDP ratio could zoom up to more than 60%.

Quotes

“Russia faces complex and interrelated challenges. Responsibly taking global leadership and advancing its economic and social agenda will require an integrated approach to reform in all sectors. The first step is to recognize that a change of direction is necessary.” 
Alexey Kudrin, Professor; Dean, Faculty of Liberal Arts and Sciences, Saint Petersburg State University, Russian Federation

“Russia is a world power and has the motivation and talent to excel. It must now establish the method by which it can realize the opportunities of the future. To succeed, we need a pragmatic, consistent and coherent approach.”
Josef Ackerman, Chairman, Zurich Insurance Group, Switzerland; Vice-Chairman of the Foundation Board of the World Economic Forum

Further resources

The Russia Competitiveness Report 2011
Scenarios for the Russian Federation

Calendar

World Economic Forum Annual Meeting 2013
23-27 January
Davos-Klosters, Switzerland 

5th BRICS Summit
30 March 2013
South Africa 

St Petersburg Economic Forum (SPIEF)
19-21 June 2013
St Petersburg, Russian Federation 

G20 Summit
5-6 September 2013
St Petersburg, Russian Federation 

The Sochi 2013 International Investment Forum
20-22 September 2013
Sochi, Imereti Lowland, Russian Federation

APEC Summit
25 November 2013
Jakarta, Indonesia

Council Insights

The Council on Russia seeks to define priorities for sustainable economic and social development and make recommendations for improving the Russian Federation’s global competitiveness.

Collaboration and cooperation will help Russia to become a constructive and responsible global leader as it takes the helm of the G20 and G8. Russia must undergo institutional reforms that will require strong political leadership and a move away from isolationism. Now that Russia has acceded to the World Trade Organization (WTO), the next important milestone should be OECD accession. It will be important to consider Russia’s global image, and to convey a consistent and coherent message to the world. 

During its forthcoming term, the Council plans to focus on a range of issues including:

• The Russian Federation has shown a strong commitment to diversify away from the unsustainable “resource curse” growth model, and is committed to balancing both quantitative and qualitative growth incorporating sustainability and regional diversity. How can economic policy incentivize and foster innovation and development of small and medium businesses to capitalize on recent WTO accession?
• Human capital remains one of the key comparative advantages of the Russian Federation; however the challenge is to ensure that educational institutions are able to compete in the current knowledge-based economy. How can Russia ensure more active business engagement in fostering human capital?
• To ensure stable and consistent economic growth, the Russian Federation will need to address a wide array of social challenges, including resolving the effects of demographic change and questions surrounding the current state of its health and pension system.

Contact Information

Council Manager: Anastasia Aubakirova, Director, Head of Russia and CIS, anastasia.aubakirova@weforum.org
Forum Lead: Borge Brende, Managing Director and Member of the Managing Board, World Economic Forum, borge.brende@weforum.org