Four key risks to Russian Economy revealed

Four key risks to Russian Economy revealed

Moody's Investors Service has released a comprehensive report on the Russian economy, analyzing its capabilities and key risks in the medium term.

The Agency's analysts estimate the share of the public sector in the Russian economy at 40-50%, taking into account partially privatized companies. "The dominance of the public sector and monopolization hinder the growth of investment and productivity," the agency said. 

"The high proportion of state ownership creates unequal conditions for business activity, exacerbating other factors that inhibit entrepreneurship, such as weak property rights and the relative lack of the rule of law," the analysts wrote.

The demographic situation in Russia also constrains the potential for economic growth.

Another factor, according to the agency, is the possible U.S. sanctions against Russian state-owned banks and Russia's sovereign debt.

The main external risk is capital outflow, the agency stressed, RBC reported.

Nevertheless, Moody's experts believe that socio-economic instability and military conflicts near the borders of Russia will contribute to the flow of population from the affected regions and Russia is likely to remain the beneficiary of such geopolitical tensions. Thus, a steady influx of able-bodied migrants from Central Asia and Ukraine will alleviate the labor shortage.

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