OREANDA-NEWS. November 26, 2007. The World Bank Issued a series of reports on situation in Russia:

1. RECENT ECONOMIC DEVELOPMENTS. Russian economic performance remains robust. Having grown by 7.9 percent (year on year) in the first half of the year, Russia is likely to post full-year GDP growth of over 7 percent in 2007. Output growth was driven by rising domestic demand, in particular, buoyant household consumption and business investment. On the supply side, sectors servicing the domestic demand (construction and retail trade) continued to boom. Manufacturing growth remains solid but is tapering off. The negative contribution of net exports to GDP growth is explained by the real appreciation of the ruble, which is making Russia’s exports more expensive abroad and imports less expensive to domestic consumers.

2. PRODUCTIVITY GROWTH IN RUSSIA.  This section is based on the analysis for a forthcoming World Bank (2007) study entitled "Unleashing Prosperity: Productivity Growth in Eastern Europe and the former Soviet Union" The report shows that Russia has experienced a productivity surge over the period 1999-2005, propelling economic growth and raising living standards. Total factor productivity growth of 5.8 percent has been the driving force behind average GDP growth of 6.5 percent over this period. Part of the productivity surge is explained by utilization of excess capacity. The productivity surge is also attributable to major structural shifts in the economy and the reallocation of labor and capital to more productive sectors. The report also shades light on firm dynamics and their contribution to manufacturing productivity growth. Efficiency gains within firms accounted for 30 percent of the total growth in manufacturing productivity over the period 2001-2004. A more efficient allocation of resources across firms accounted from 24 percent. Firm turnover (entry of new firms and exit of obsolete ones) accounted for 46 percent of manufacturing productivity growth. The main contribution to manufacturing productivity growth came from the exit of obsolete firms, releasing resources that could be used more effectively by new or existing firms.

3. FROM RED TO GRAY: THE THIRD TRANSITION OF AGING POPULATION IN RUSSIA.  A recently published World Bank regional report entitled “From Red to Gray: The Third Transition of Aging Populations in Eastern Europe and the Former Soviet Union” (2007) argues that after the political and economic transition, Russia, like other ECA countries, is undergoing a demographic transition. This "third transition" is marked by shrinking and rapid aging population. Over the next two decades, Russia"s population is expected to shrink by 12 percent (over 17 million people). In addition, elderly population will continue to rise. By 2025, one person in every five will be over the age of 65. Russia’s working-age population is expected to decline by 3 percent in the next two decades and is also aging rapidly. A declining and aging population poses two key challenges: sustaining economic growth with a shrinking labor supply and managing fiscal costs associated with aging. The demographic challenge, though uniquely daunting, is by no means impossible. Many of the potential problems associated with aging can be mitigated through policy reforms aimed at boosting productivity and controlling fiscal costs related to health care, elderly care and public pension payments.

Russian Economic Reports is a series of periodic economic reports from the Moscow office of the World Bank. Each report contains a concise description of the major economic trends and issues facing the Russian economy. In addition, the reports often include a special focus, based on work carried out by the World Bank as part of its assistance program to the Russian Federation.