During a recent research trip to Russia, we gained valuable insights into the country’s new economy. As the nation’s economic recovery begins to splutter despite a backdrop of higher oil prices, we ask: can Russia’s tech sector provide much-needed balance to the economy?
Cyber-espionage accusations against Russia, state sanctions and poor governance have dominated news flow in recent years. The fundamentals of the country’s technology sector have been overshadowed by the state’s alleged interference in the 2016 US presidential campaign and hacking of state secrets and corporations.
Russia’s tech sector pales in comparison to the country’s oil and gas industry in size, which produced an average of almost 11m barrels per day in 2017 – the highest level since the collapse of the Soviet Union in 1991. But despite higher oil output and prices, the country’s economic recovery from its 2015-2016 recession remains anaemic. Russia’s economy grew 1.5% in 2017, undershooting its 2% target, after industrial production unexpectedly fell in November due to a slowdown in Russian defence spending.
Consensus forecasts point to 1.9% GDP growth this year. Furthermore, at 7.5%, the Bank of Russia’s key interest rate further constrains growth.