Country Experiencing Impressive Economic Growth

Bromberg & Associates is happy to announce a new series of articles that will familiarize readers with different cultures, countries, and languages. The agency works with more than 100 languages worldwide; however, since the majority of the agency’s full-time staff members, including the founder and president Jinny Bromberg, were born in the former Soviet Union and have very close ties with this region, we decided to dedicate the first article to the Russian Federation.

In the midst of rapidly growing giants of the world economy, such as China and India, Russia may not seem like such a hot commodity anymore. However, Russian Finance Minister Alexei Kudrin recently pointed out that with the current 7% GDP growth, Russia has a chance to double its GDP in three to five years. In a news conference following a plenary meeting of the Pacific Economic Congress in Vladivostok, the Finance Minister also said Russia’s GDP could double by 2012-2014 compared with 2002, if annual growth does not drop below 7.2 percent.

Russian economic growth hit a six-year high of 7.9% year in the first quarter, propelled by strong growth in construction, manufacturing and trade. The result is particularly impressive in light of the small contribution made by oil and gas. Although economic growth is likely to ease during the rest of the year, robust domestic demand may ensure that the full-year rate does not slow appreciably from the 6.7% outturn seen in 2006.

State statistics agency RosStat released full first-quarter GDP data on June 14. The main factors behind the 7.9% headline growth figure were a 23.2% rise in construction, an 11.8% expansion in manufacturing and a 9.1% increase in trade. Large gains were also registered for hotels and restaurants (13.9%), the wholesale and retail trade (9.1%), financial intermediation (9.9%) and transport and communication (7.9%). In the year-earlier period, GDP growth was 5% and in the fourth quarter of 2006, it was 7.8%.

In late July, the Russian government tentatively approved two laws that would sharply restrict foreign ownership of oil and natural gas fields, putting into writing what is already well established in practice.

One law would also ban foreign majority ownership of companies in the aerospace, military and nuclear power industries, while stating that all other sectors should be open equally to Russian and foreign capital.

Savvy business owners should definitely pay attention to Russia as it moves towards becoming one of the world’s prominent economic figures. Although there are still many challenges faced on both sides, one irrefutable fact is that doing business in Russia can be potentially very lucrative for any company looking to tap into the Russian market.