#11
St. Paul (Minnesota) Pioneer Press
January 20, 2002
Russians enjoying economic rebound
BY DAVE MONTGOMERY
Knight Ridder Foreign Service
MOSCOW -- While the United States and other industrial powers confront economic uncertainty, Russia has bounded into the new year on a wave of prosperity that seemed unimaginable three years ago.
The Russia of 2002 is almost a mirror opposite of the Russia that weathered a financial crash in 1998. Today, the country's oil-driven economic growth is outpacing the rest of the world, apparently unaffected by the financial turbulence that rocked other countries after Sept. 11.
Higher prices for oil and gas, which compose half of Russia's exports, fueled the economic rebound and spawned broad investment in other sectors. Analysts also credit two years of political stability under President Vladimir Putin and a series of pro-business economic changes, including lower taxes.
As a result, the land of Lenin is awash in capitalism and consumerism.
Wages rose 20 percent last year, giving Russians more buying power. Store shelves brim with nearly every conceivable product, from Tommy Hilfiger sweaters to Red Dawn lingerie.
The Russian stock market was the fastest-growing in the world in 2001. Thousands of merchants had record profits during the holiday season.
"Russia has one of the star economies of the world," said Ed Parker, an analyst with the Fitch Rating Agency of London, which tracks global economic performance.
Still, Russia is a long way from joining the ranks of the world's economic superpowers. Its $308 billion gross domestic product is roughly the size of Portugal's and about 5 percent of the United States'.
What's more, many of Russia's 145 million people aren't sharing in their country's newfound prosperity. Average income remains far below Western standards at about $72 a month. Most of the new spending power is centered in cities such as Moscow and St. Petersburg.
Nevertheless, national economic growth has been strong in recent years, ending nearly a decade of decline since the Soviet Union collapsed in 1991. Russia produced 8.3 percent growth in 2000 and 5.5 percent last year. Economic analysts project 3.5 percent growth in 2002, while the global economy is expected to produce its smallest rate of growth in two decades -- about 1 percent.
Russia's strong reliance on oil exports has raised fears that a collapse in oil prices could put the country back into crisis. Although benchmark oil prices have dropped to about $20 a barrel, experts think Russia can avoid economic damage as long as prices fall no lower than $12 to $15 a barrel.
"We don't foresee any major problems," Parker said.
The new prosperity is everywhere on the streets of Moscow. Gone are images of stoic Russians lined up for hard-to-get food or imports. With money in their pockets, Russians shop at stores that offer a mix of domestic and imported goods.
Alexander Khailov, a 45-year-old driver for a family of French expatriates, typifies the eager-to-spend consumer. Growing up, he shared a two-room apartment with his grandparents, parents and sister. Now, his $700-a-month salary has enabled him to build his own house and buy a Russian-built Lada car and creature comforts such as a CD player, color TV and a microwave. "I have everything I want," he said.
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