UN CALLS RUSSIA AN “ENGINE OF GROWTH” FOR THE CIS.

Publication: Monitor Volume: 8 Issue: 89

The government apparently feels that President Vladimir Putin’s criticism of it for projecting “insufficiently ambitious” economic growth figures is unfair. An unnamed high-level government official quoted today said: “The rate of growth is not set by directives. To force people to translate ideological presidential instructions into a concrete figure is to drive oneself into a blind alley” (Vremya Novostei, May 7).

It should also be noted that many, if not most observers in the West do not share Putin’s gloomy mood about Russia’s economy. Indeed, Fitch Ratings, the international rating agency, announced last week that it had upgraded Russia’s long-term ratings from “stable” to “positive.” The agency said it expected that “under President Putin’s leadership, the Russian authorities will continue to introduce and implement structural reforms that are vital to raise living standards and diversify the economy” (RBK, May 2; see the Fortnight in Review, May 3).

The United Nations Economic Commission for Europe (UNECE), meanwhile, released its “Economic Survey of Europe, 2002 No. 1” last week. It called Russia “an engine of growth” for the Commonwealth of Independent States. The report said, among other things, that Russia’s economy has “changed dramatically for the better” in the four years since the August 1998 financial crisis and that three years of “strong growth” have “improved the welfare of the population and boosted public confidence, both domestically and internationally.” The report praised Russia’s government for trying “to break with the stop-go policies of the past and to accelerate systemic transformation and market reforms,” noting that “[p]robably more sweeping and comprehensive legislative and regulatory reforms were introduced in Russia in 2001 than in any other year since the start of economic transformation.” It singled out for praise reforms that “reduce the level of taxation and seek more transparency and uniform treatment of taxpayers,” pension reform and the new Land Code permitting the free sale of residential land along with measures to de-bureaucratize the economy, fight money laundering and liberalize the labor market. “Most of these reforms are marked by the spirit of economic liberalization: they are aimed at fostering entrepreneurship and developing the infrastructure of the market economy in Russia,” the report stated. “It can be expected that they will contribute to higher levels of economic activity in the future.” The UN report noted, however, that Russia’s strong reliance on oil exports is a “mixed blessing.” It urged that this dependence be reduced, with the long-range goal of transforming Russia’s economy into “a knowledge-based economy whose exports are not dominated by primary commodities but by technology intensive, high value added manufactured goods” (UNECE press release, May 2).

Such factors help explain why Russia’s economic performance is well off its high, reached in 2000, when its GDP grew by more than 8 percent. According to the CIS’s statistical committee, industrial growth for CIS states in the first quarter of this year compared to the first quarter of 2001 is as follows: Armenia, 13.9 percent; Kazakhstan, 12.1 percent; Azerbaijan, 10.1 percent; Moldova, 8.8 percent; Tajikistan, 5.4 percent; Ukraine, 3.1 percent; Russia, 2.6 percent; Belarus, 2 percent; Georgia, 1.2 percent. Industrial output in Kyrgyzstan shrank by 11.9 percent. There were no statistics on industrial output for Uzbekistan and Turkmenistan for the first quarter of this year (Kommersant, May 7).

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