The Epic Interactive Encyclopedia 1997/The_Epic_Interactive_Encyclopedia_97.iso/u/ussr/infotext

Text File | 1992-09-02 | 5KB | 131 lines

A vast country with a wealth of natural
resources, a well-educated population,
and a diverse industrial base, continues to
experience severe difficulties
in moving from its old centrally planned
economy to a modern market economy.
President YELTSIN's government has made some
progress toward a market economy
by freeing most prices, slashing defense
spending, unifying foreign exchange
rates, and launching an ambitious
privatization program. Yet much of the old
order persists and YELTSIN faces formidable
opposition to further measures
such as the reduction of subsidies to
old-line industries. Output continues
to fall although the mix is gradually
becoming more responsive to Russia's
needs. According to Russian official data,
GDP declined by 12% in 1993 compared
with 19% in 1992. Industrial output in 1993
fell 16% with all major sectors
taking a hit. Agricultural production,
meanwhile, was down 6%. The grain harvest
totalled 99 million tons - some 8 million
tons less than in 1992. Unemployment
climbed in 1993 but remained low by Western
standards. The official number
of unemployed rose from 578,000 at the
beginning of 1993 to about 1 million
- or roughly 1.4% of the work force - by
yearend. According to the Russian
labor minister, the actual number of
unemployed probably was closer to 4 million.
Government fears of large-scale unemployment
continued to hamper industrial
restructuring efforts. According to official
statistics, average real wages
remained flat. Nonetheless, a substantial
portion of the population, particularly
the elderly and people in remote areas, finds
its well-being steadily shrinking.
The disparity in incomes between the rich and
poor continued to rise in 1993,
primarily reflecting the high earnings of
enterprise managers and persons
employed in the emerging private sector. The
government tried to narrow the
income gap by raising the wages of
budget-funded workers - mainly teachers
and health care specialists. Official data
may overstate hardships, because
many Russians supplement their income by
moonlighting or by bartering goods
and services, activities that often go
unreported. Russia made good progress
on privatization in 1993 despite active
opposition from key cabinet members,
hard-line legislators, and antireform
regional leaders. By yearend, for example,
roughly 35% of Russia's medium and large
state enterprises had been auctioned,
while the number of private farms in Russia
increased by 86,000, reaching
a total of 170,000. As a result, about 6% of
agricultural land now has been
privatized. Financial stabilization continued
to remain a challenge for the
government. Moscow tightened financial
policies in early 1993 - including
postponing planned budget spending - and
succeeded in reducing monthly inflation
from 27% in January to 20% in May and June.
In the summer, however, the government
relaxed austerity measures in the face of
mounting pressure from industry
and agriculture, sparking a new round of
inflation; the monthly inflation
rate jumped to 25% in August. In response,
Moscow announced a package of measures
designed to curb government spending and
inflation. It included eliminating
bread subsidies, delaying payment
obligations, raising interest rates, and
phasing out concessionary Central Bank
credits to enterprises and regions.
The measures met with some success; the
monthly inflation rate declined to
13% in December. According to official
statistics, Russia's 1993 trade with
nations outside the former Soviet Union
produced a $16 billion surplus, up
from $6 billion in 1992. Moscow arrested the
steep drop in exports that it
had been suffering as a result of ruptured
ties with former trading partners,
output declines, and erratic efforts to move
to world prices. Foreign sales
- comprised largely of oil, natural gas, and
other raw materials - grew slightly.
Imports were down by 15% or so as a result of
new import taxes and Moscow's
reluctance to increase its debt burden by
purchasing grain and other goods
with foreign credits. Russian trade with
other former Soviet republics continued
to decline and yielded a surplus of some $5
billion. At the same time, Russia
paid only a fraction of the roughly $20
billion in debt coming due in 1993,
and by mid-year, Russia's foreign debt had
amounted to $81.5 billion. While
Moscow reached agreement to restructure debts
with Paris Club official creditors
in April 1993, Moscow's refusal to waive its
right to sovereign immunity kept
Russia and its bank creditors from agreeing
to restructure Moscow's commercial
loans. Capital flight continued to be a
serious problem in 1993, with billions
of dollars in assets owned by Russians being
parked abroad at yearend. Russia's
capital stock continues to deteriorate
because of insufficient maintenance
and new construction. The capital stock on
average is twice the age of capital
stock in the West. Many years will pass
before Russia can take full advantage
of its natural resources and its human
assets.