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18
VimpelCom / Annual Report 2007
Extensive Growth of the Russian
Economy: Our Past, Present and Future
Бурный рост экономики России:
наше прошлое, настоящее и будущее
VimpelCom is rapidly developing, moving
into adjacent businesses and expanding
geographically. Nevertheless, Russia
remains our stronghold, our largest and
most important market. Hence, the key
to our success is the continued healthy
growth of the Russian economy.
Observing Russia’s progress after the 1998
financial crisis, we can observe a steady
advance with an impressive yearly GDP
growth in the range of 7%. This growth
was originally stimulated by the ruble
devaluation and the need to develop
local production to replace imports with
domestic products. Later on, rising prices
for raw materials, particularly oil, gas and
metals have played a key role. Russia,
as one of the largest exporters of these
natural resources, has reaped tremendous
benefits from these developments.
Over the past ten years Russia’s financial
position has changed dramatically. Russia
has reduced all major debt obligations, has
settled its debts with the Paris Club, and has
exercised fiscal restraint. The reserves of the
Russian Central Bank have grown to $476.4
billion at the end of 2007, giving Russia the
third largest central bank reserve in the
world. A huge stabilization fund of $144.4
billion has been accumulated to protect
Russia against an economic downturn. The
average monthly salary grew from $65 in
1999 to $650 in 2007.
Growth in the Russian economy has
stimulated positive changes in all spheres
of Russian society. From a business
perspective, one of the most important
features is that Russia has become a consumer
driven society. This transformation has led
to an unprecedented growth in demand for
mobile telecommunications and the demand is
now spreading into other parts of the telecom
industry, notably broadband Internet.
While Russia’s economic success in the past
decade is truly remarkable, the country
still lags behind many developed nations
in important areas. In 2007, Russian (PPP
adjusted) GDP per capita was $14,700 compared
to $35,100 in the U.K., $34,200 in Germany and
$45,800 in the U.S.A. Prime Minister Vladimir
Putin and the newly elected President Dmitry
Medvedev have called for substantial efforts
aimed at closing this gap during the next
12 years, with a goal to put Russia in line
with the most developed nations. Achieving
these plans would imply GDP growth rates
remaining at the level of 7%. Although these
plans are ambitious, we believe that they can
be achieved with a combination of favorable
macroeconomic circumstances and a focus on
developing a diversified Russian economy.