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Russia Overview


    The Russian economy is near stagnation, with continued lowered domestic demand leading to growth of 0.8 percent in the first half of 2014, similar to 0.9 percent in 2013. It was operating on the threshold of recession in the first half of 2014 with quarterly seasonally adjusted growth for the first two quarters close to zero. As a result, Russia’s growth dipped in the first quarter under that of all other relevant comparator country groups. Consumer and business sentiments were already weak in 2013 due to lingering structural problems and contributed to the wait-and-see attitudes of households and companies and leading to a slowdown of the Russian economy to 1.3 percent from 3.4 percent in 2012.

    Increased geopolitical risks and the new environment of policy uncertainty and sanctions had an additional negative impact on economic activities in the first half of 2014. It hit the economy through three channels: (1) increased volatility on the exchange rate market and a significant depreciation of the national currency; (2) limited access to international financial markets for banks and non-financial corporations, and (3) suppressed business and consumer confidence about future growth prospects.

    The World Bank says there are substantial risks to the medium-term outlook for Russia’s 2014-2016 growth. As the Russian economy needed to internalize several rounds of sanctions, countersanctions and measures to stabilize the economy, this environment of higher risk lowered domestic demand.

    In the first half of 2014, macroeconomic stability continued and Russia remains in possession of large buffers to uphold stability in the near future. However, there is little movement on the structural reform agenda, which could boost Russia’s growth potential in the medium-term. Both of these observations together are captured in the World Bank’s most likely scenario―the baseline scenario―with positive but low growth near stagnation in 2015 and 2016.

    • The baseline scenario is one of stagnation with projected 0.5 percent growth for 2014, 0.3 percent in 2015 and 0.4 percent and 2016.
    • This baseline is paired with two alternative scenarios: an optimistic scenario foresees a small growth recovery to 0.9 percent in 2015 and 1.3 percent in 2016, and
    • A pessimistic scenario sees the economy slipping into a low-level recession, contracting by 0.9 percent in 2015 and 0.4 percent in 2016.

    A return to higher growth in Russia will depend on solid private investment growth and a lift in consumer sentiment, which will require creating a predictable policy environment and addressing the unresolved structural reform agenda.

    A more balanced and diversified portfolio of national assets, including natural resources, capital, and economic institutions, will help overcome structural constraints to growth. Institutional weaknesses are now the main stumbling block on the road to greater economic efficiency and a higher growth potential. Structural reforms would need to focus on improving economic institutions to ensure stable public finances and well-managed volatility; improved education and infrastructure to make workers more productive; and stronger competition regimes to encourage private enterprises and entrepreneurship. Stabilization, education, and competition should be the reform priorities for the next decade.

    Last Updated: Oct 08, 2014

    Russian Federation: Commitments by Fiscal Year (in millions of dollars)*
    *Amounts include IBRD and IDA commitments

    The World Bank Group engagement with the country is unique in that it is three-dimensional: global, regional, and national. At the global level, Russia has increased its contributions to IDA and supports the provision of global public goods through contributions to global funds. In addition, the WBG offers its expertise to help prepare Russia’s presidency of international forums. At the regional level, the WBG supports Russia as an emerging donor for less-developed countries in ECA. Russia is already a significant provider of development assistance through a growing portfolio of IDA-IBRD-administered Trust Funds. At the national level, the WBG aims to maximize its development by reaching out to the regions in Russia with the most development needs. The current WBG 2012–16 CPS was discussed by the Board of Executive Directors on December 20, 2011. It is aligned with government priorities and covers four themes: (i) Increasing Growth and Diversification, (ii) Expanding Human Potential, (iii) Deepening Russia's Role in Global and Regional Development, and (iv) Improving Governance and Transparency (as a crosscutting theme).The strategy endorsed an envelope of up to US$5 billion in IBRD lending to support the program over the five-year period. IFC foresees total investments between US$3.8 and US$4.8 billion for its own account, plus the significant mobilization of counterpart funds. The Multilateral Investment Guarantee Agency (MIGA) continues to support foreign investors through the provision of political risk guarantees.

    The Russia program is distinguished by several cooperation and innovation initiatives. These include IFC and IBRD subnational lending, RAS, and a joint strategy that capitalizes on IFC’s and MIGA’s work in the private sector. The WBG is in constant search of innovative engagement opportunities and instruments, such as direct lending to regions with a sovereign guarantee and a mechanism to fund analytical work and technical assistance to poorer regions.

    Deepening Russia’s Role in Global and Regional Development

    The majority of Russian development assistance is currently being channeled through multilateral institutions, including the WBG. The World Bank is a partner of choice for Russia’s development cooperation with the poorest countries. In particular, Russia has been a partner to International Development Association (IDA) since the ninth replenishment (referred to as “IDA9”) in 1997 and has shown growing support and commitment to the World Bank Group development programs and Trust funds. Russia pledges to 17 IDA/IBRD Trust funds with contributions reaching a total of over US$248 million.

    Russia has increased its regional role and become the second largest Trust Fund donor in ECA at the World Bank after the European Union (EU). Russia has five Trust Funds (US$74 million, or 30 percent of total Russian Trust Fund pledges) exclusively targeting ECA countries: (i) Public Expenditure Management and Peer-Assisted Learning (PEMPAL), (ii) Public Financial Management (PFM) Trust Fund, iii) ECA Statistical Capacity Building Trust Fund, (iv) ECA Capacity Development Trust Fund, which finances program and project preparation, and (v) Global Food Price Crisis Response Program for Tajikistan and the Kyrgyz Republic. Russia is increasing its regional role in ECA also through the Eurasian Development Bank (EDB), a multilateral organization focused on Commonwealth of Independent States (CIS) countries and the Eurasian Economic Community (EurAsEC) Anti-Crisis Fund managed by EDB.  The Anti-Crisis Fund received resources in the amount of US$8.514 billion, of which US$7.5 billion was contributed by the Russian Federation to support CIS countries in response to the 2008–09 crisis. On March 14, 2011, the World Bank and the EDB signed a Framework Agreement that outlines their collaboration with regard to the projects of the EurAsEC Anti-Crisis Fund via the parallel cofinancing of investment projects and joint analytical work.

    Last Updated: Oct 08, 2014

    Russian Federation: Commitments by Fiscal Year (in millions of dollars)*
    *Amounts include IBRD and IDA commitments

    The World Bank

    The Russian Federation joined the World Bank (IBRD and IDA) in 1992. The Bank has provided financing for 70 projects in different sectors totaling slightly over US$10.5 billion in IBRD loans. About 95 percent of the total portfolio has already been disbursed.

    The current IBRD portfolio consists of 10 projects with a total current commitment of US$668.3 million (as of September 2014). All of the Bank’s financing to Russia is currently provided in the form of investment project financing. Reimbursable Advisory Services (RAS) show steady demand, with continued interest from the regions and growing demand from the federal government.

    Portfolio quality is relatively high. Except for the Financial Education and Financial Literacy Project, which holds moderately unsatisfactory rating in implementation progress, all other projects are rated at the moderately satisfactory or satisfactory level. The Judicial Reform Support Project went through two intensive restructurings and has been upgraded to moderately satisfactory. FY14 closed with a disbursement ratio of 15.5 percent, which was below ECA’s average of 23 percent. The average project age is 5.2 years, attributable to the fact that the majority of the projects are designed as five-year investment operations.

    Analytical and Advisory Services (AAA) remain an important part of IBRD’s engagement in Russia. In close cooperation with the Government, AAA products are helping to modernize public finance and administration and improve social service delivery and the investment climate. The Bank expanded its technical assistance to areas of early childhood development (ECD) and social development, such as technical assistance on indigenous people and social accountability. In FY14, along with two traditional flagship Russia Economic Reports, the World Bank presented the reports on “Environmental Perspective of Russia’s Accession to the WTO”, “Corporate Governance Reform in Russia” and several others. The report on social mobility is being prepared for release in FY15.

    In October 2013, the World Bank and IFC presented “Doing Business 2014: Understanding Regulations for Small and Medium-Size Enterprises.” The report found that the Russian Federation made starting a business easier by abolishing the requirement to have the bank signature card notarized before opening a company bank account. It made dealing with construction permits easier by eliminating several requirements for project approvals from government agencies and by reducing the time required to register a new building. And it made getting electricity simpler and less costly by setting standard connection tariffs and eliminating many procedures previously required. In addition, Russia made transferring property easier by streamlining procedures and implementing effective time limits for processing transfer applications. Finally, it made trading across borders easier by implementing an electronic system for submitting export and import documents and by reducing the number of physical inspections. Russia’s DB2014 ease of doing business rank was 92.

    Demand has grown rapidly for RAS. Since 2007, the WBG has entered into more than 80 RAS for a total of almost US$ 40 million. Agreements cover a wide range of activities that are well aligned with Russia’s development challenges. RAS are also of increasing importance for Russia’s regions with more than 30 of Russia’s subnational governments having signed at least one RAS with the WBG (15 currently active in 9 different regions).

    Innovative RAS products allow the WBG to build and keep a lead in global knowledge provision.  One of the areas of early demand for RASs was in support for large-scale infrastructure projects where WBG advisory services supported the St. Petersburg Pulkovo airport expansion based on a private-public partnership (PPP). Pulkovo attracted more than EUR1.2 billion of private investments and was awarded the title of "Global PPP deal of the Year" by Infrastructure Investors in 2011. As international experience and analytical components are often critical success factors for education, health and social protection, demand from clients has led to widespread use of RAS in associated global practices as well. During the past two years, RAS are also in demand for improving the investment climate, providing economic policy advice and the local initiatives support program.

    International Finance Corporation

    Russia became an IFC member in 1993. Since then, IFC’s investments in Russia have totaled US$11.7 billion, including US$3.4 billion in syndicated loans across 309 projects. IFC’s current committed investment portfolio in Russia is US$1.9 billion in over 100 projects with about 70 clients. In FY14, IFC committed US$655 million at its own account and mobilized US$104 million from partners. Since the beginning of FY15, IFC committed about US$60 million at own account. 

    In line with the World Bank Group CPS, IFC continues supporting economic diversification and growth in Russia by helping its private sector clients realize long-term development potential, with particular focus on maximizing impact in less-developed regions, including creation of new high-skilled jobs; expansion of high value-added manufacturing; and improvement of transport and social infrastructure to provide people and companies with better access to goods and services. In addition, IFC provides Russian companies and banks with strategic advice on achieving long-term sustainable growth, increasing energy and resource efficiency, improving corporate governance, and advises Russian regions on structuring municipal infrastructure projects. 

    Multilateral Investment Guarantee Agency

    MIGA’s gross exposure in Russia is US$852 million as of August 2014 (MIGA’s second largest gross and net exposure). MIGA is involved in eight projects in finance, infrastructure, manufacturing, agribusiness, and services. In dollar terms, MIGA’s exposure is concentrated in Russia’s financial sector (some 80 percent of MIGA’s gross exposure), supporting the investments of global financial institutions in their banking, mortgage, and leasing subsidiaries in Russia. Five out of MIGA’s eight projects are in non-financial sectors, some of them in Russia’s regions; such as agribusiness – in Russia’s ‘black earth’ regions of Penza and Tambov, and manufacturing – in Novocherkassk.   

    Last Updated: Oct 08, 2014

    Russian Federation: Commitments by Fiscal Year (in millions of dollars)*
    *Amounts include IBRD and IDA commitments
Country Office Contacts
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