Future of the Russian Republic

Gross Domestic Product and the New Independent States

The stress of moving from a centrally planned economy to a free market has proven difficult, but not impossible, for Russia. The country has established new ties in the world economy while maintaining links to traditional trading partners, although in a more limited capacity than in years past. Russia is responsible for more than one-half of the population of the New Independent States (NIS), a coalition of members of the former Soviet Union, and accounts for more than 60 percent of the gross domestic product (GDP) of the NIS.

Russia's own GDP fell approximately 38.5 percent between 1992 and 1997, although these official statistics may not reflect significant activity in the black market. Analysts

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ntain the ruble's stability and to help keep inflationary fears low. The average exchange rate for the ruble was 5120 per dollar during 1996. Fiscal Policy The 1996 budget provided a strong foundation for the government's economic stabilization program. However, the government experienced severe revenue shortfalls that resulted in higher than expected deficits (reaching 6.1 percent of GDP). The shortfall is generally attributed to a fall in output, an increase in the activity in the gray and black market, and an overall cumbersome and unwieldy tax system which has rates high enough to encourage significant levels of tax evasion. The government issues securities (GKO) which has grown in conjunction with the government's needs for noninflationary financing. Total GKOs outstanding reached nearly nine percent of GDP by December 1996. Despite these optimistic projections, there are very real problems with the GKOs. In 1996, for example, yields on government securities reached as high as 350 percent and inflation dropped to 22 percent. Managers and bureaucrats throughout the economy, particularly in the banking sector, embezzled money and invested it in GKOs and doubled the market for government securities to more than $42 bill
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Approximate Word count = 1598
Approximate Pages = 6 (250 words per page)

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