Russia overview

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Cityscape in Russia

The EBRD is currently only supporting its existing projects and clients in Russia. The Bank’s operational approach, following guidance from a majority of Directors, is currently not to undertake any new business in the country.

In Russia we focus on:

Diversifying the economy: private enterprises and private financial institutions that support non-resource sector growth are key for diversification. About 90 per cent of EBRD investments in Russia in 2013 were in the private sector.

Investing in and setting standards for modernisation and innovation: focus is needed on enterprises that innovate, introduce modern new technologies, or upgrade to international standards, particularly with regard to corporate governance, transparency, energy efficiency, inclusion and gender issues. Improving energy efficiency is a key aspect of modernisation across various sectors of the economy.

Supporting privatisation and private sector development: the role of the private sector in the economy needs to increase through strengthening existing private operators; increasing the MSME share in the economy; pursuing transparent and competitive majority privatisation strategies for state-owned companies; conducting policy dialogue on privatisation; and promoting PPPs as a tool to attract more private sector investment into state-dominated sectors.              

Increasing economic opportunities in Russian regions: Russia is a federal state whose component regions vary widely in terms of per capita income, unemployment and investment. To promote regional development, it is necessary to support projects and reforms that advance transition in regions that are less advanced than Moscow and St. Petersburg and that are committed to improving the investment climate.

As well as being a country where the EBRD works, Russia is also an EBRD donor. In 2013 the Russian government established its first bilateral Technical Cooperation fund with a contribution of €40 million over five years in support of the EBRD’s core operations in the country. Funding is focused on the development of projects in transport and infrastructure, energy efficiency, agribusiness and SMEs. Russia also remains the biggest donor to the NDEP environmental window with total contributions totalling €60 million.

The EBRD’s latest Russia strategy was adopted on 18 December 2012

Russia's policy response to the coronavirus crisis

The EBRD is monitoring Russia's policy response to the coronavirus pandemic. Our biweekly publication identifies the major channels of disruption as well as selected impact and response indicators.

Learn more

Current EBRD forecast for Russia’s Real GDP Growth in 2020 -4.5%

Current EBRD forecast for Russia’s Real GDP Growth in 2021 4.0%

The Russian economy grew by 1.3 per cent in 2019, down from 2.3 per cent in 2018. This slowdown was driven in part by the ongoing stagnation of real incomes, weighing on domestic demand. At the same time, weaker external demand negatively affected net exports, while tight fiscal policy in the face of international sanctions constrained public and private investment.

A government reshuffle in January 2020 provided a clear signal of intentions to adopt a more pro-growth stance and relax the tight policies of recent years. Key actions were the announcement of a 2.1 trillion roubles social spending package to support real incomes, and the pledge to access 1 trillion roubles from the National Wealth Fund to push the 12 National Projects, a US$ 400 billion investment aimed at modernising and revitalizing Russian society, implementation of which had been behind schedule. These activities will take place within the constraints of the budget rule, which mandates the sterilization and transfer of oil revenues in excess of a US$ 42 per barrel threshold to the National Wealth Fund. The question is what will happen to policy in the face of twin shocks: the coronavirus pandemic which has hit global demand, and the collapse of the OPEC+ agreement to limit oil production, which together caused oil prices to fall substantially and resulted in a sharp slowdown in activity. A subsequent renegotiation between the partners of the OPEC+ agreement has failed to cut production sufficiently to support oil prices.

The fall in the oil price caused a significant depreciation in the rouble, but the CBR has continued its rate cutting cycle, assessing the inflationary impact of the depreciation to be outweighed by the deflationary impact of the coronavirus-related slowdown in activity. Despite the diversification seen in recent years, the Russian economy remains dependent on oil for budget revenues and exports, so the fall in oil prices is significant, particularly in light of the fiscal stimulus needed to offset the impact of the pandemic. Although the National Welfare Fund has enough funds to finance several years of budget deficits, and international reserves stand at US$ 570 billion, enough to fully cover public and external debt, this financial security has been hard won and will be closely guarded.

Taking all factors into account, the economy is expected to shrink by 4.5 per cent in 2020, followed by a rebound of 4.0 per cent in 2021. This forecast is subject to significant upside and downside risks, depending primarily on the path of oil prices and the extent and duration of social distancing measures.

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