Russia: Economic and Political Overview

Economic Overview

On February 24th 2022, Russia initiated a military conflict on the Ukrainian territory, which profoundly upsets the current political context in both countries and will have substantial political and economic ramifications. For the ongoing updates on the developments of Russia-Ukraine conflict please consult the dedicated pages on BBC News.

The latest specific information on economic sanctions against Russia in response to the conflict in Ukraine is available below:
•    What sanctions are being imposed on Russia
•    The list of global sanctions on Russia for the war in Ukraine

After a strong recovery from the COVID-19-induced recession, the Russian economy contracted again in 2022 (-2.1%), in the context of the war in Ukraine and the subsequent economic sanctions imposed by Western countries (IMF). In 2023, however, the country’s GDP growth was stronger than expected, reaching an estimated 2.2% amid substantial budget support. Due to the Central Bank of Russia tightening monetary policy, which is likely to dampen domestic demand, the IMF outlook indicates a slower growth rate this year (1.1%), with a further decrease to 1% in 2025 (1.3% and 0.9%, respectively, according to the World Bank). In general, Russia's reliance on imports is not that significant, but certain sectors face high exposure, notably transportation equipment manufacturing, chemicals, food products, and IT services. Sanctions limiting access to Western inputs have adversely affected these sectors, prompting efforts to seek substitutes from other countries such as China, Belarus, and Turkey, as well as allowing parallel imports.

Concerning public finances, Russia's federal budget deficit amounted to 1.9% of the country's GDP in 2023, or RUB 3.24 trillion (about USD 36.1 billion), according to preliminary data by the Russian Finance Ministry. The volume of federal budget expenditure totalled RUB 32.36 trillion, a 4% year-on-year increase. On the other hand, revenues amounted to RUB 32.36 trillion (+4.7% year-on-year), with non-oil and gas revenues reaching RUB 20.30 trillion, a 25% increase, whereas oil and gas budget revenues fell by 23.9% to RUB 8.82 trillion. The 2024 budget sees a remarkable surge in spending, reaching RUB 36.6 trillion in 2024 with an expected deficit of RUB 1.595 trillion. As of December 31, 2023, the external debt of the Russian Federation amounted to USD 326.6 billion, marking a decrease of USD 57.0 billion or 14.9% from the end of 2022, as estimated by the Bank of Russia. This decline was primarily driven by reductions in liabilities from various sectors, including loans raised within direct investment arrangements. The rapid decrease in the indebtedness of the general government was influenced by a reduction in the volume of Russian sovereign debt securities. The debt-to-GDP ratio was estimated at 21.2% in 2023 by the IMF and is expected to remain relatively stable over the forecast horizon. In an effort to prevent inflation from getting out of control, the Russian central bank raised interest rates to about 16%; the inflation rate, however, remained relatively high in 2023 (at 5.3%) given the government stimulus packages. The decrease in oil and gas prices throughout 2023 significantly reduced demand for the Russian ruble. Consequently, the currency experienced a depreciation of 30% against the USD since the end of November 2022, coinciding with the implementation of the West's oil embargo and price caps.

Social inequalities remain high, especially between large cities and rural areas: only 1% of the population owns around 70% of private assets. Despite the emergence of an urban middle class, the poverty rate remains at around 14.3% (Rosstat, January-March 2023). According to IMF estimates, the unemployment rate decreased to 3.3% in 2023, from 3.9% one year earlier. It is forecast to drop slightly to 3.1% this year before picking up to 3.5% in 2025 amid lower real economic growth.

Main Sectors of Industry

Despite its large area, Russia has relatively little arable land due to unfavourable climatic conditions. The country nevertheless owns 10% of the world's agricultural land and is one of the main exporters of cereals. The northern regions of the country focus mainly on livestock, while the southern regions and western Siberia produce cereals. Agriculture contributes 3.9% of the national GDP and employs around 6% of the total working population. According to Rosstat, in 2023, grain harvest amounted to 142.6 million tons, including 92.8 million tons of wheat. In the same year, Russia sold USD 43 billion worth of agricultural products, which was 14% higher than the previous season. The main growth drivers were grains and legumes, vegetable oils, milk powder, oilseeds, and meat.

Industry accounts for 32.8% of Russia's GDP and employs 27% of the workforce. The Russian industrial sector is characterized by its diverse range of industries and resources. Key sectors include energy, with Russia being one of the world's leading producers of oil, natural gas, and coal. Additionally, the country has a robust manufacturing sector, particularly in heavy industries such as metallurgy, machinery, and aerospace. The automotive industry also holds a significant position within Russian industrial production. Emerging sectors include technology and innovation, with a focus on sectors such as information technology, biotechnology, and nanotechnology. Russia's industrial sector is undergoing modernization efforts aimed at enhancing efficiency, productivity, and competitiveness in the global market. Russia’s industrial production growth stood at 3.5% y-o-y in 2023, with industries such as furniture, computers, electronic and optical products, motor vehicles, and pharmacology recording the best performances (Rosstat).

The service sector employs 67% of the population and generates 54% of the GDP. Dominant sectors include finance and banking, with Moscow serving as a prominent financial centre in the region. Retail and wholesale trade play significant roles. The tourism industry is also important although it was hindered by the COVID-19 pandemic and the conflict with Ukraine. Emerging sectors include information technology (IT) and digital services, as Russia seeks to capitalize on its skilled workforce and technological capabilities. Additionally, there is increasing attention on healthcare and education services as the government aims to improve access and quality in these areas.

Source: World Bank, Latest data available.

Indicator of Economic Freedom

Score:

61,5/100

World Rank:

92

Regional Rank:

42

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

Business environment ranking

Score:

5.72/10

World Rank:

60/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2021-2025

Sources of General Economic Information

Ministries

Ministry of Economic Development
Ministry of Industry and Trade

Statistical Office

Federal State Statistics Service

Central Bank

Russian Central Bank

Stock Exchange

Moscow Exchange

Other Useful Resources

Chamber of Commerce and Industry

Main Online Newspapers

TASS (Russian Government news agency)
The Moscow Times
Kommersant (in Russian)
Expert (in Russian)
RIA-Novosti (Russian Government news agency, in Russian)

Political Outline

Current Political Leaders

President: Vladimir Vladimirovich Putin (since 7 May 2012 ; re-elected in March 2024) - United Russia
Prime Minister: Mikhail Mishustin (since 16 January 2020) - United Russia

Next Election Dates

Presidential: 2030
State Duma: September 2026

Current Political Context

On February 24th 2022, Russia initiated a military conflict on the Ukrainian territory, which profoundly upsets the current political context in both countries and will have substantial political and economic ramifications. For the ongoing updates on the developments of Russia-Ukraine conflict please consult the dedicated pages on BBC News.

Vladimir Putin, who has been in power for 18 years, started a new six-year presidential term in May 2018. Continuing from his previous term, he emphasises conservative values, anti-Westernism and the nationalism of the great powers. In 2020, amid the COVID-19 pandemic, Putin called for a referendum that validated constitutional changes that allow him to seek re-election in 2024 and potentially remain in power until 2036.
After an increasingly hostile rhetoric and prolonged military build-up in 2021, Russia invaded Ukraine on February 24th 2022. Western countries adopted an unprecedented range of sanctions aimed at pushing the Russian economy into a deep recession and isolating the country from the rest of the world. As Russian forces were losing momentum on the battlefield, Putin ordered a partial mobilisation, and stepped up attacks against Ukraine's critical infrastructure, and in January 2023, a new military commander, Valery Gerasimov, was appointed (The Economist). Sanctions pushed Russia to increase economic collaboration with its partners including Belarus, Iran, Turkey and China. During 2023, hundreds of thousands of citizens, predominantly young males, fled the country following the announcement of partial mobilization. This led to a mass exodus of Russians across the border into neighbouring countries such as Georgia, Finland, Kazakhstan, and Mongolia, seeking to evade conscription.
On June 23, 2023, the Wagner Group, a paramilitary organization funded by the Russian government, initiated a rebellion following escalating tensions between the Russian Ministry of Defence and the then-leader of Wagner, Yevgeny Prigozhin. A resolution to this conflict was reached between the two parties the following day. Following the fatal plane crash that claimed the life of Yevgeny Prigozhin, President Vladimir Putin – who said that Western suggestions that Prigozhin had been killed on its orders were an "absolute lie" - instructed Wagner fighters to pledge allegiance to the Russian state.
The new presidential election will be held on 15–17 March 2024. In November 2023, Boris Nadezhdin, a former member of the State Duma, became the first candidate backed by a registered political party to announce his candidacy, running on an anti-war platform. Subsequently, Leonid Slutsky of the LDPR, Nikolay Kharitonov of the Communist Party, Vladislav Davankov of New People, Sergey Malinkovich of Communists of Russia, and others declared their candidacies later in the same month. However, on February 8, 2024, during the CEC's session, the only anti-war candidate, Boris Nadezhdin, was disqualified from running against Putin in the election due to alleged irregularities in the signatures of voters supporting his candidacy. Malinkovich faced a similar disqualification for the same reason, resulting in only four candidates remaining on the ballot.

Main Political Parties

In Russia, the powers of the executive were greatly increased by the adoption of a new constitution in 1993. The political apparatus is overwhelmingly in the hands of the United Russia party. While opposition parties are authorised, there is little chance for these parties to wield any real power. The main parties are:

- United Russia: centrist, remains the largest and seemingly most popular party in Russia, self-declared focus on 'Russian conservatism'
- Communist Party of the Russian Federation (CPRF): left-wing, seeks to establish modern socialism
- A Just Russia (CP): centre-left, ally of United Russia
- Liberal Democratic Party of Russia (LDPR): far-right, opposes communism and capitalism, self-described as centrist, an extreme right nationalist political party
- New People: liberal, centrist.

Type of State

Russia is a federal republic.

Executive Power

The President is the Head of State. He is elected by universal suffrage for six years. He is the commander-in-chief of the army and the real centre of power in the country. The Prime Minister is the Head of Government. He is appointed by the President, with the approval of the lower house of Parliament, and manages the everyday business of the country.

Legislative Power

Russia has a two-chamber legislative power. The Parliament, called the Federal Assembly, is composed of: the Council of the Federation (upper chamber), which has 170 seats and the members are appointed by the regional governors and legislative institutions, for a four-year term of office; and the State Douma (lower chamber), which has 450 seats; its members are elected by direct universal suffrage from partisan lists, for a four-year term. The State Duma now includes 3 representatives from the "Republic of Crimea," while the Federation Council includes 2 each from the "Republic of Crimea" and the "Federal City of Sevastopol," both regions that Russia occupied and attempted to annex from Ukraine.

Indicator of Freedom of the Press

World Rank:

150/180

Indicator of Political Freedom

Ranking:

Not Free

Political Freedom:

7/7

Civil Liberties:

6/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

COVID-19 Country Response

Travel restrictions

Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test and vaccines requirements is available on TravelDoc Infopage.
To find information about the current travel regulations, including health requirements, it is also advised to consult Travel Regulations Map provided and updated on a daily basis by IATA.

Import & export restrictions

A general overview of trade restrictions which were adopted by different countries during the COVID-19 pandemic is available on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.

Economic recovery plan

For the general overview of the key economic policy responses to the COVID-19 pandemic (fiscal, monetary and macroeconomic) undertaken by the government of Russia, please consult the country's dedicated section in the IMF’s Policy Tracker platform.

Support plan for businesses

For an evaluation of impact of the Covid pandemic on SMEs and an inventory of country responses to foster SME resilience, refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.