At the start of the year the prospect of a rapidly appreciating rouble and higher than expected inflation were seen as the biggest dangers facing Russia's economy. Both have come to pass but the economy continues to roar ahead regardless. The combination of cheap money from abroad and rising productivity has offset these dangers and is driving Russia's impressive growth.
Russia's first strong growth after a 1998 devaluation was fuelled by the cheap rouble, which lost 75% of its value against the dollar in a day. Economists worried that an appreciating rouble would kill the first green shoots of growth as the devaluation fillip was eaten away. The rouble has already clawed back 80% of the value against the dollar it lost.
Investment on the increase
| Inflation versus exchange rate |
| Source: Aton, Goskomstat |
It appears that rising competition has already led factories to invest in boosting productivity - investment that is being facilitated by the cheap money coming from abroad. The Russian economic development and trade ministry began the year with a 4.3%