Russia: Collapse and Recovery
Posted: 7 Jul 2002
The financial collapse in Russia in the summer of 1998 was a profound shock to the efforts to reform the Russian economy. It was also thought that it would seriously worsen the short- and medium-term outlook for growth and inflation. In this article, Brian Henry and Evgeny Gavrilenkov argue that the most recent data show that the more pessimistic of these views were probably misplaced; modest but significant growth has been evident since the collapse without substantial increases in inflation. The real improvements, in so far as they are simply the results of devaluation and the beneficial effects of the increase in the world oil price, could prove to be temporary, although there are more hopeful indicators with the recent increases in investment. But to ensure sustainable recovery, fundamental improvements in the structure of the economy, especially in the areas of industrial and financial restructuring, are needed. Meanwhile, they argue that it would be very beneficial for medium-term prospects if progress is made on the twin problems of external debt reduction and tax reform.
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