There was never any doubt that Russia, one of the world’s great powers, would shake off the last vestiges of a centrally-planned state and ride out the chaotic years of post-communism. There have been stumbling blocks along the way, not least the 1998 debt crisis and devaluation, but four years of growth have set this vast country well on track for a prosperous future.

It is now possible to plan ahead – there seems little doubt that President Vladimir Putin will be re-elected in 2004, and under current rules, his term could extend for eight years. International ratings agencies Fitch, Standards & Poor’s and Moody’s Investors Services all upgraded Russia last year. Continuing support for government market reforms are making Russia a better prospect for international business opportunities than ever before.
Mr Putin has also embarked on a series of major reforms designed to attract more foreign direct investment (FDI) into the country. The volume of FDI is already growing and links with the West are strengthening on a daily basis. The rapid pace of development is most noticeable in Moscow and St Petersburg, but many foreign investors are now looking beyond the major cities.

Recent figures issued by the Russian authorities underscore the economy’s brave performance. Russia’s money supply – including foreign currency – rose nearly 34 per cent last year. The ratio of Russian bank assets to gross domestic product (GDP) is now around 38 per cent, compared with 26.2 per cent in 1998 and 33.2 per cent in 2001.
Public confidence in the banking system has been restored – deposits by the public have risen to 9.3 per cent of GDP, up from 7.6 per cent last year.

Living standards are rising as Russian consumers become more confident and make major purchases. At the same time, small and medium-sized entrepreneurs are finding it easier to obtain credit and are taking the plunge and starting up new business ventures.
The government is also determined that it will pay off the country’s external debts. “The policy of debt repayments and unconditional fulfilment of liabilities to foreign creditors is beneficial for the economy of Russia,” says Deputy Finance Minister Sergei Kolotukin.
Economic growth is also being driven by greater exports. Russian foreign trade reached its highest level in a decade last year, when exports totalled $105.8 billion (up 5.8 per cent on the previous year) and imports totalled $46.6 billion (up 9.8 per cent).

Prime Minister Mikhail Kasyanov says Russia will continue to pay its foreign debts throughout 2003 and domestic debt will decrease to 35 per cent of the GDP by the end of the year, down from the current 40 per cent and 100 per cent in 1999. He also says the tax burden would fall further, to below 31 per cent of GDP. “We are developing very rapidly,” adds Mr Kasyanov. “The Russian people have a natural ability to learn and implement and are absorbing new ideas at an incredible pace. We have achieved sustainable growth and I am sure we have a bright future,” he says.

Russia is the world’s second-biggest oil exporter, and is only prevented from exporting even more by its lack of pipeline capacity. Output reached a high in January, at just over eight billion barrels of oil per day (bpd). The government would like the opportunity to increase exports, aware of the fact that Europe and elsewhere in the world need secure supplies in the long term.

The ties between Russia and the West continue to grow stronger, with Russia’s willingness to close the gap between the military powers of East and West. Nato and Russia recently signed an agreement to help each other in rescue operations if their submarines got into difficulties – one of the first agreements of the Russian-Nato partnership launched in June last year.

Increasing confidence in the Russian markets, despite the global economy’s uncertain outlook, has convinced many foreign investors to set out their stalls in the country. Added to this, a new breed of young Russians is also beginning to create new businesses and fill the executive roles in major companies.