Wednesday, February 08, 2012

Russia: "Political And Economic Stability In Russia Will Attract Foreign Investment"

SOURCE Russia Insights

Konstantin Zavinovsky of the Institute of Advanced Studies in Geopolitics and Auxiliary Sciences, has said that relative economic growth in Russia in recent years has improved the quality of life in Russia, and the prospect of foreign direct investment into the country.

Zavinovsky said: "The Russian economy in the last decade has seen a steady growth. After the economic crisis in the late 90s, starting from 2000 GDP per capita in Russia increased steadily rising from about $ 7600 in 2000 to nearly $ 17000 in 2011. This means that the index more than doubled in 10 years. The growth was interrupted only for a year because of the 2008 financial crisis which produced a slight decline in GDP per capita in 2009. But already next year, in 2010, this index started to grow and almost reached pre-crisis level. According to the forecasts of the International Monetary Fund (IMF) the index will grow steadily over the next year to nearly $ 22000 in 2016. We should add that in the same period inflation in the country declined from 20.78% in 2000 to 8.8% in 2011 (6.1%, according to the Russian Ministry of Finance - Minfin) and according to the forecast of the IMF inflation in Russia is to diminish in future and will reach 6.64% in 2014 (4.5%, according to Minfin).

"With the rise of income the quality of life of Russian citizens in recent years has improved considerably. And thus the image of Russians in the world has also changed. For example, in Italy 10 years ago the Russians were seen as a backward people, rather poor and far away from European civilization, now the Russians have become a symbol of wealth and economic well-being. Russian customers are very appreciated in Italy both by small traders on the narrow streets of Rome, Florence andVenice and by the great Italian fashion designers such as Salvatore Ferragamo, who believes Russians to be "customers number one in Europe". Precisely for this reason at the end of last year the Michele Norsa CEO announced that "over the next five years we expect to double sales volume in Russia, where the growth will be +20% annually over the past 24 months". Dirk Bikkemberg also stated that Russian clients are the target of extreme importance because thanks to them flagship store in Milan, considered by many as a loss, not only got in balance with the accounts but also opened 47 new stores in 2011. Italian newspapers say that due to purchases of Russian clients sales of the Italian outlets in contrast to the general crisis. The most important Italian financial newspaper Il Sole 24 Ore suggested making investments in the Russian ruble bacause Russia has a high economic growth and its national debt is very low. The tourism industry that made Italy famous also makes plans with a focus on the Russian customers. The examples are numerous and cover many sectors, while news of this kind are discussed widely in the Italian press. This shows that currently the Italian business world has confidence in the Russian market and is ready to invest in it.

"So in only 10 years, Russia managed to change her image in Italy (in Europe and the world). Today it appears as a stable country, a country with an economic growth and with many investment opportunities. This change wasn't an easy one and required great efforts from the Russian government in 2000 when Russia was economically weak - in 2000 GDP was almost half of that of 1992. Today Russia's GDP is nearly 7 times bigger than that of 2000 and amounts to nearly 2 trillion dollars. According to IMF, this figure is expected to rise and in 2016 GDP will amount to 3 trillion.

The increase of Russia's prestige in the eyes of the Europeans and the strong economic growth were possible thanks to political and economic stability of the country which was a merit of politicians who led Russia in recent years. The political destabilization of Russia would lead to distrust of the future of the Russian market and foreign capitals would flee from the country. So Russia should continue to move in the same direction of political stability if it wants to preserve and enhance the economic well-being and thus to remain an attractive country for foreign investment."

Konstantin Zavinovsky is editor of "Geopolitics" magazine and researcher at the Institute of Advanced Studies in Geopolitics and Auxiliary Sciences (ISAG)