Overview

  • Country Context

    The Russian Federation2019
    Population, million144.5
    GDP, current US$ billion
    1,660.9
    GNI per capita, US$ (2017)10,230
    Life Expectancy at birth, years (2016)72.1

    In May 2018, Russia set ambitious economic targets that include accelerating Russia’s growth to approximately 3 percent and halving the poverty rate to 6.6 percent by 2024.

    Doubling growth will require, in addition to expanding the labor force through a higher retirement age (which has already been enacted), implementing reforms that increase inward migration, boost investment, and increase total factor productivity (TFP) growth.

    Government initiatives to increase spending on education, health, and infrastructure could lift potential growth. Intensifying competition in the domestic market remains essential to achieving higher productivity.

    Modest annual GDP growth will not in itself lead to halving poverty by 2024. However, this goal could be achieved by an additional redistribution of roughly 0.4 percent of GDP annually through social assistance and transfers.

    This assumes a significant improvement in the coverage of the poor within the current social assistance system, with some of these additional funds to be secured through savings resulting from efficiency enhancements.

    Last Updated: Oct 29, 2019

  •  

    Strategy

    Number of active projects6
    IBRD net commitments$496 million

    The World Bank conducts research and analysis and provides policy advice and capacity development on topics critical to Russia’s economic and social development at the federal and regional levels.

    World Bank support focuses on such areas as the investment climate, green finance, health care, education (including early childhood development and skills), social protection, and communitydriven development and participatory budgeting.

    Ongoing projects support the improvement of basic service delivery at the local level, increased financial literacy, and the protection of the environment.

    Russia is an important development partner for the World Bank Group. The Bank’s partnership with the Russian Government helps bring the country’s knowledge and financial resources to benefit other countries around the world.

    Since 2007, Russia has pledged US$896 million to the International Development Association (IDA).

    Russia has also contributed US$280 million across 22 World Bank–administered trust funds in support of education, small and medium enterprise (SME) development, public financial management, and other development areas in countries across Europe and Central Asia, Africa, and the Middle East.

    Russia has pledged US$438 million to eight Financial Intermediary Funds that tackle global development challenges, such as HIV/AIDS, tuberculosis and malaria, debt relief, environmental protection, women’s entrepreneurship, and governance and public institutions in Middle East and North African countries under transition. Most recently, Russia pledged US$3 million to the Green Climate Fund.

    KEY ENGAGEMENT

    The World Bank’s Advisory Services and Analytics program is organized under two broad themes:

    1. Growth and competitiveness, which focuses on macroeconomic and fiscal management, labor market informality, productivity, the investment climate, SME development, trade integration, and the digital economy;
    2. Human capital, poverty, and shared prosperity, which focuses on education, including early childhood development and integrated health care, and social protection.

    Many activities are delivered as Reimbursable Advisory Services (RASs). The RAS portfolio includes activities on the investment climate, statistics, health care, education and skills, social protection, and community-driven development and participatory budgeting.

    The knowledge program is delivering results. The Local Initiatives Support Program (LISP) has helped boost citizen participation in municipal decision making. Citizens, working together with municipal authorities, identify and prioritize smallscale infrastructure projects that address specific community needs. This has led to the more effective use of local budgets and a more rapid implementation of projects.

    The LISP started in the region of Stavropol krai 14 years ago. Today, LISP is a national program, covering about one-third of Russia’s 80-plus regions. More than 12,000 participatory projects have been implemented, benefiting over 7.5 million people. On average, 20 percent of all projects has been co-financed from regional business and local community resources. 

    Last Updated: Oct 29, 2019

  • Recent Economic Developments

    Real GDP growth decelerated to 0.7 percent in the first half of 2019 from 2.3 percent in 2018, owing to lackluster domestic and external demand. Economic sanctions continued to weigh on economic performance.

    Real disposable incomes fell by 1.3 percent in the first half of 2019, reflecting a hike in value added tax (VAT) rates in January 2019, and inflation accelerated. A decline in public investment, partly related to the slow process of setting up and launching a number of national projects, negatively affected total investment.

    Mineral resource extraction, financial services, and the transportation sector led growth, while trade and real estate acted as significant drags.

    A sound macroeconomic framework, with relatively high levels of international reserves (US$519.8 billion), low external debt levels (about 30 percent of GDP), and comfortable import cover (18.4 months), positions Russia to absorb external shocks well.

    In 2018, the general government posted a surplus of 2.9 percent of GDP compared to a deficit of 1.5 percent of GDP in 2017. To adjust the budget system to the new fiscal rule, the Government conducted fiscal consolidation, bringing the nonoil/gas federal budget deficit to 6 percent of GDP in 2018 from 10.3 percent in 2013.

    The Central Bank of Russia (CBR) moved to inflation targeting in 2015, which was a welcome move. Monetary policy remains consistent with the inflation-targeting regime (the target is set at 4 percent).

    Russia’s banking sector has been relatively stable. The CBR has continued its cleanup of the sector by revoking the licenses of some smaller banks and focusing on the financial rehabilitation of large financial institutions. The state continues to dominate the banking sector, and increasing competition in the financial sector is one of the priorities of the CBR’s financial sector development strategy for 2019–21.

    The poverty rate, using the national definition (the share of the population with a monthly income per capita of less than RUB 10,088 in 2017), fell in 2018 by 0.6 percentage points to 12.6 percent.

    The unemployment rate fell to 4.7 percent in the first half of 2019 (from 4.9 percent in 2018), while real wages rose by 6.8 percent. Wage growth was highest in the public sector.

    Pensions increased by 0.8 percent in real terms. Incomes at the bottom of the distribution grew slightly faster than at the top, supported by an increase in the minimum wage and new family benefits.

    Priority policy objectives include limiting the role of the state in the economy, increasing investment, and promoting fair competition, as well as measures to improve investments in human capital.

    > LEARN MORE: Russia Monthly Economic Developments

    ECONOMIC OUTLOOK

    Growth in Russia is expected to be 1.2 percent in 2019; 1.6 percent in 2020; and 1.8 percent in 2021. A less restrictive monetary policy and increased spending on national projects is expected to help foster growth. National projects are expected to contribute about 0.1 percentage points (pp) to GDP growth in 2020 and about 0.2-0.3 pp in 2021.

    The moderate poverty rate is expected to continue to decline in 2019 and through 2021, although vulnerability needs to be monitored. Increasing the existing means-tested programs and expanding their reach would help to reach the goal of halving poverty by 2024.

    > LEARN MORE: Russia Economic Reports

    Last Updated: Dec 04, 2019

  • Highlighted Project

    Boosting Financial Literacy to Improve Livelihoods and Economic Prosperity

    For the past 28 years, since Russia’s transition to a market economy, people have had to build-up their financial management skills, practically from scratch. Financial education is therefore critically important for Russians—from children and youth to adults and retirees—to ensure that they are able to receive the full benefits of the financial system, understand financial products and their related risks, plan for a sustainable future, and improve their lives. 

    To promote financial literacy across the country, the Government of the Russian Federation and the World Bank launched the Financial Education and Financial Literacy (FEFL) project in 2011. The project has focused on boosting the financial literacy of Russian citizens (especially, among school-age and college students, and active and potential low- and middle-income users of financial services), and strengthening the foundations for improving consumer protection in financial services. The project started in nine pilot regions, and has now expanded to reach beneficiaries in almost all Russian regions.

    Image

    To build financial management skills from an early age, financial literacy modules are being imbedded into required classes as social studies, math, literature, and geography at schools, professional colleges, and universities. Nearly 12 million copies of textbooks on financial literacy have been distributed to schools this year. Trainers are getting trained too: the national system of financial literacy training for educators has reached about half of all schools in Russia. The OECD has recognized the FEFL project’s unique approach involving parents in school education as successful, and as an example of best-practice worldwide.

    Innovative solutions, combining education and entertainment, and using social media, has helped reach millions of people across age and income levels: the National Savings Weeks for adults, the National Weeks of Financial Literacy for children and youth, and financial education and elements introduced by the popular cartoon characters, Smeshariki, for kids. The “Good Ideas Fund” supports financial literacy and grass-roots initiatives by civil society, NGOs, public and private sector entities, and individuals to improve consumer protection.

    Image

    The project has contributed to measurable outcomes and sustainable results. Russia jumped six places—from 10th place in 2012 to 4th place in 2015—in the OECD Program for International Student Assessment (PISA) of financial literacy among 15-year-old students. In 2017, the Government approved the Strategy for Financial Literacy Development in Russia (2017–23). The Strategy’s goal is to create opportunities for financially literate behavior of the population as an essential condition of financial well-being of households and more broadly, of sustainable growth. 

    The successful experience of FEFL in Russia has been shared globally and replicated in a number of countries. Countries of the Commonwealth of Independent States (CIS) which face similar challenges, have found the Russian experience particularly useful and applicable. The FEFL project team organized high-level conferences and technical discussions for knowledge exchange with financial literacy experts from Armenia, Azerbaijan, Belarus, Kazakhstan, the Kyrgyz Republic, and Tajikistan. The Kyrgyz Republic replicated the Russian model of organizing regional centers for financial literacy and introducing financial education programs in schools.

    In 2018, the OECD-Russia Symposium on Financial Literacy in Moscow gathered more than 250 international experts from 60 countries. The symposium focused on innovative implementation approaches to deliver global progress on financial literacy, and Russian experts shared their hands-on experience in providing financial services via digital platforms, reaching vulnerable groups, and strengthening consumer protection.

    Image
     

    Last Updated: Oct 16, 2019


Results on the Ground



STAY CONNECTED

Additional Resources

Country Office Contacts

Moscow, Russia
36/1 Bolshaya Molchanovka st., 121069, Moscow, Russia
+7 (495) 745-7000
moscow@worldbank.org