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CRCE Briefing Paper

Russia: Crisis, Exit and Reform

by Philip Hanson

Price for print edition: £7.50

About the Author

Philip Hanson is Emeritus Professor at CREES, University of Birmingham, where he was Director for many years. He is an Associate Fellow of the Royal Institute of International Affairs Russia and Eurasia Programme. His interests include comparative economic systems, the Soviet and Russian economies, and economics of transition; currently working business-state relations in Russia and on the assessment of Russian economic policies. Professor Hanson is a CRCE trustee and editorial board member of Post-Communist Economies.

This is a revised version of a paper presented at the conference on 'The International Crisis and the Post-Soviet States', at the University of Glasgow, 13-14 May 2010.

RUSSIA: CRISIS, EXIT AND... REFORM?

Abstract. Russia's experience of the economic crisis and its future economic prospects are examined. Evidence is provided that the sharp fall in GDP in 2008-09 was the result of the business world's perceptions of risk, conditioned by institutional weaknesses; it cannot be blamed simply on the fall in oil prices. Sources-of-growth analysis is used to assess likely development of Russian GDP in 2010-20, and policy and reform options are reviewed. Growth is likely to be slower than in 1998-2008; radical economic and political reform is unlikely; partial economic reform may be capable of generating some improvements in performance.

Russia did not have a good crisis. According to Rosstat estimates in May 2010, Russian economic activity fell for four successive quarters from mid-2008. From the IMF's World Economic Outlook database it can be seen that Russian GDP fell in 2009 by more than that of any other G-20 country. There were smaller countries that fared worse, including all the Baltic states; but among large developed or emerging economies Russia's deterioration stands out. Russian economic performance worsened by considerably more, between 2008 and 2009, than that of the other BRICs, the Eurozone, the US, Japan or Saudi Arabia. The experience of the last of these, and of the Middle East as a whole, suggests that the steep deterioration in the Russian economy is not to be accounted for by its dependence on oil and gas. Other leading exporters of hydrocarbons experienced only a mild worsening of their economic conditions.

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