Russia experienced robust economic growth in 2007 supported by high energy prices and rising domestic demand. Short-term challenges include controlling inflation from large capital inflows and maintaining prudent fiscal policy. Medium-term challenges are sustaining productivity growth, boosting infrastructure and private investment, and economic diversification. Russia's population is shrinking and rapidly aging, which will reduce the labor force and increase social spending, presenting fiscal challenges if not addressed.
11. Food prices increased, but prices of non-tradable goods and services also increased… Changes in prices of the main components of the CPI
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17. Russia has experienced a productivity surge, propelling economic growth Total factor productivity growth (5.8 percent) drove GDP growth (6.5 percent) over (1999-2005) Real income per capita (constant $2000,PPP) rose from $5,964 in 1998 to $9,650 in 2005 But capital and labor accumulation played little role in total output growth
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20. The productivity surge is also explained by major sectoral shifts in the economy A substantial reallocation of resources toward services Efficiency gains ‘within sectors’ had more impact on total productivity growth than cross-sector shifts Labor productivity over 1999-2004 grew by : 4.4 percent in agriculture , 4.7 percent in industry and 6.4 percent in services
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22. Productivity growth came mostly from efficiency gains within firms -but reallocation & net entry also mattered Highest Productivity Growth in ICT sectors
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25. Sustaining Productivity Growth Calls For Policy Reforms that Accelerate Reallocation of Resources towards More Efficient Uses Russia has most to gain from policy catch-up
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27. Shrinking and Rapid Aging Population % Population Decrease, 2000-2025 % of over-65 population, 2000-2025 These demographic trends will affect labor supply : Declining and aging labor force : labor force will decline by 3 percent (about 11 million people). Over 95 percent of the decline will come from the 15-39 age group Russian population is also aging rapidly: by 2025, one person in every five will be over the age of 65 . (share of population over 65 will be 18 percent in 2025) Russia’s population will shrink by 12 percent (over 17 million people) by 2025 17 million
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