Working Paper #583
The Russian Investment Environment
David Skinner
Demographics Europe Macroeconomics Urban
Russia’s economy has benefited from high international commodity prices over the past few years. The medium-term economic outlook appears robust and the reserves generated from oil and gas revenues should offer a partial solution to some of Russia’s severe structural problems. Russia’s population is decreasing and will likely fall by 6 percent in urban areas in the next twenty-five years versus a rural decline of 30 percent. However, the prognosis for Moscow and St. Petersburg, whose populations will likely rise in the next ten years, is much more positive. There have been deregulation and a reduction of administrative barriers to business in Russia. Positive changes have also taken place in some institutions enforcing corporate governance laws, but progress has been slow, and the enforcement of contracts and property rights has been uneven. Bureaucratic corruption appears to have risen in recent years. Nevertheless, there has been a significant improvement in the investment environment over the past few years, as evidenced by an improvement in sovereign ratings.