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Russia: turning point in year 2000

Author: David Roche

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As I write, Russian troops are preparing to blast and occupy the Chechnyan capital, Grozny. As a result, G7 governments are putting pressure on the IMF not to release the next tranche of funds promised under the credit facility agreed after the collapse of the rouble in summer 1998. At the same time, Russia's politicians are gearing up for a parliamentary election.

Ironically, all these uncertainties about Russia's future are happening after a year in which much of Russia's past economic disasters have been reversed. Russia is riding high on the wave of the world's cyclical economic recovery. Inflation is coming under control. Tax revenues have almost doubled and the budget is close to balance. The share of net exports has surged from close to zero in early 1998, to nearly 15% of GDP. This has helped lift the country's GDP by 1-2% this year. The rouble devaluation has created a cushion of competitiveness for Russian exporters. And, with oil prices rocketing, export revenues will remain high for the foreseeable future.

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