Economic Factors In Russia

Economic Factors In Russia

When considering property purchase in Russia, many buyers will be encouraged to know that the country offers a large number of economic advantages to overseas investors.

Economy Firmly in Recovery

After a fall of 7.8% in 2009, Russian GDP grew 8.6% over the next 2 years (4.3% in 2010 and 2011) according to the IMF. This more than recoups the losses. According to the Federal State Statistics Agency (Rosstat) the Russian economy grew 4.9% year on year in Q1 2012 and 4% inQ2. The IMF is predicting 4% growth for the year ahead, but the Economic Bank for Reconstruction and Develpment predicts growth of 3.1%.

Property Prices Low but Growing

According to Rosstat the average price of all apartments across Russia was 52504 rubles (£1,059) per sqm in 2008, in 2011 this price had fallen to 43686 rubles (£881) per sqm. Luxury apartment have fallen even more sharply from 69,612 rubles (£1,404.11) per sqm in 2008 to 49,042 rubles (£989.201) per sqm last year.

But the market has started to turn this year. According to Rosstat the price of all apartments in Russia grew by 7.88% in the year ending Q1 2012.

Strong Stable Macro-Econonomy

Russia is the world's 7th largest economy by purchasing power parity (2010). It has the world's 2nd highest gold and foreign exchange reserves (US$479.4 bln – 2010) and Significant Government Reserve (US$60.5 bln - 2009) and National Welfare (US$91.6 bln – 2009) Funds.

Upcoming Sporting Events

Russia is due to host the World Cup in 2018. This has proven not to have a massive effect on the property market, but on the economy it can have a sizeable impact in the positive.

Huge Consumer Base

Russia has over 139 million people, whose incomes are increasing every year, making it the 9th biggest consumer market as ranked by the World Economic Forum in 2010-2011. Within that only 14.4% of the adult population have a credit history, which makes it a huge and largely untapped consumer market.

Unsurprisingly then, Russia was ranked tenth among developing countries in the A.T. Kearney Retail Trade Index 2010. In a statement accompanying the report Kearney said: "Russia remains Europe's largest consumer market, with rising disposable incomes and an expanding middle class, and it offers massive growth opportunities for retailers with a long-term approach."

According to a PricewaterhouseCoopers study sales of foreign brands produced in Russia grew by 73% in unit terms and by 100% in monetary terms in 2010, and by a further 40-80% in unit terms the following year.

Vast Natural Resources

    • 32% of explored world reserves of natural gas (1st place)
    • 35% world gas production and exports (1st place)
    • 1st place in oil production and 2nd place in oil exports
    • 18% of world reserves of oil (7th place)
    • 23% of explored world reserves of coal (1st place)
    • 47% of world reserves of peat (1st place)
    • 23% of world forest resources (1st place)
    • 1st place in sodium salt reserves and 2nd place in potassium salt reserves
    • 1st place in drinking water reserves and 2nd place in fresh water reserves
    • 1st place in the stocks of pollacks, crabs and sturgeons in the 200 mile economic zone and 2nd – 3rd place in the stocks of codfish, herring, capelin, polar cod, salmon, etc.
    • 1st place in world explored reserves of tin, zinc, titanium and niobium
    • 1st place in world reserves and production of nickel ore and refined nickel
    • About 28% of explored world iron ore reserves (1st place)
    • 1st place in steel exports and 3rd place in exporting rolled metal products
    • 1st place in primary aluminum production and exports
    • 1st place in nitrogen fertilizer exports, 2nd and 3rd place in the exports of phosphate and potash fertilizers, respectively
    • 1st place in world diamond reserves and 2nd place in world diamond production
    • 1st place in actual volume of diamond exports
    • 1st place in explored world silver ore reserves
    • 2nd place in explored world gold ore reserves
    • 2nd place in explored platinum ore reserves and 1st place in exports of platinum ore
    • 3rd place in explored world copper and lead reserves
    • 3rd place in explored world wolframium and molybdenum reserves
    • 10% of world reserves of uranium (9th place)
    • 40% of world reserves of nickel
    • One of the biggest world reserves of fresh water
    • 1st place in the world in per capita natural resources

Investor Incentive Schemes

Becuase of its vast natural resources, Russia doesn't have the same desperate need to entice foreign investors as other nations, however, in recent years it has begun to make more of an effort in this area, including the creation of 15 Special Economic Zones, 4 for the tech ind., 2 industrial, 6 tourism, and 3 port zones.

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