Machinery Light Industry Food Disposable income

Russia’s economic performance in 2002, with GDP up over 4.3%, compared favorably with slow growth in Europe and in the US. However, even this represented a slowdown in growth on previous years and on the back of high oil prices, too.1 High GDP growth rates in 1999-2002 (6.4 % annual average) have been achieved on the back of high oil prices, a strong balance of pay-ments, healthy fiscal performance, and increased capacity utiliza-tion. Increased fiscal revenues (which largely resulted from high oil prices) easily allowed the government to raise wages in the public sector and stimulate domestic demand considerably. The latter stimulated domestic production, especially in the early post-crisis period. However, the period of “cheap ” growth in recent years has practically come to an end. Higher capacity utilization, which easily contributed to rapid growth in productivity, is already out of the question.2 The recorded slowdown in economic growth in 2002 indicates that the existing model for economic growth came to an end of its useful life. The drop in manufacturing on the back of rapidly growing real disposable incomes in 2002 clearly proved that (Fig. 1). It is well recognized that the structure of the national econ-omy is skewed towards the fuel and energy sector, which ac-counts for 30 % of industrial output, one third of consolidated budget revenues and over half of federal budget revenues. Exports 1 According to the most recent data, the Russian economy grew 6.4 % in 1999, 10.0 % in 2000 and 5.0 % in 2001. 2 Especially in the sectors which are able to produce competitive goods