How Competitive Is the Russian Economy?

Only available on StudyMode
  • Download(s) : 382
  • Published : June 8, 2011
Open Document
Text Preview
Table of contents
Introduction2
The Concept of Competitiveness3
Created versus inherited prosperity3
Indicators and enablers of competitiveness5
Determinant of Competitiveness6
EMPIRICAL EVIDENCE ON RUSSIA’S OIL PRICE , DEPENDENCE AND THE RISK OF THE DUTCH DISEASE10 THE ROLE OF RAW MATERIALS IN RUSSIA’S EXPORTS10
THE ROLE OF RAW MATERIALS IN DOMESTIC PRODUCTION12
IS RUSSIA SHOWING SYMPTOMS OF THE DUTCH DISEASE?15
2008 Economic Crisis18
Conclusion22

Introduction
Since I could choose a country from Commonwealth of Independent States (CIS), the choice was pretty natural for me. I have chosen the major member which has the biggest global influence among the other participants. The country which has actually formed the CIS is Russia. The point of the whole research is to put oneself in the shoes of en exporter or investor. What does the investor want? He wants to gain as much return on investment as possible. What does this factor depend on? Actually, it depends on lots of nuances, but the most important is economic growth of a country. What if several countries show the same performance on average? The investor should choose between the ‘competitors’. Any favorable environment attracts new businesses and investments that increase its competitiveness. There are lots of factors to be taken into consideration when estimating the competitiveness of a county. Most of them have an impact on country’s GDP, so a brief look on it will give us a general picture of the state of a country’s economy and therefore its competitiveness. Russia has been showing stable GDP growth over the past years, which is certainly good. However, I strongly believe that the growth was rather artificial. Mainly because Russia’s economy is highly dependant on raw materials and most important - on its export prices. In this paper some theoretical concepts of competitiveness of Russia and its determinants are covered. In the second part Russia’s oil price dependence and the risk of the Dutch disease are examined. Of course, it will not be prudent not to consider the latest events in global economy and their impact on the Finally, I take into consideration the latest global economic events and study their nature and role for Russian economy. The Concept of Competitiveness

Competitiveness remains a concept that is not well understood, despite widespread acceptance of its importance. To understand competitiveness, the starting point must be to understand the underpinnings of a nation’s prosperity. The central economic goal of a nation is to improve the sustainable standard of living of its population. Standard of living is the true goal, not the absolute size of the economy, the level of foreign reserves, or the trade balance. Standard of living must be evaluated for all citizens, not just a few, and to improve standard of living is open to all groups. A nation’s standard of living is determined by the productivity of its economy, measured by the value of goods and services produced per unit of the nation’s human, capital, and natural resources. Productivity is what allows a nation to support high wages, attractive returns to capital, and a strong currency, and with them a high standard of living. Productivity depends both on the efficiency of production but also the value of the products and services produced, measured by the prices they can command in open markets. True competitiveness, then, is measured by productivity. Prosperity can be inherited or created. Inherited wealth comes from natural resources such as minerals, oil, arable land, and a fortuitous location. Inherited wealth has a positive direct effect on a nation’s prosperity. However, the experience of many resource-rich countries has shown that inherited wealth can make it harder to create wealth. Created versus inherited prosperity

Created wealth arises from the ability to create products and services that can be produced productively and sold domestically and...
tracking img