Russia 6th Largest Economy in World GDP Rank

Russia is the world’s eleventh largest economy by nominal GDP and the sixth largest by purchasing power parity (PPP), according the International Monetary Fund (IMF), and also considering, for a US company, as the most challenging market due to it’s geopolitical context causing a decreasing of FDI. Yet, investors can be seduced by the Russian market, which presents several opportunities such as the access to its 142 growing consumers class, an extensive natural resources, a high-income of living and enjoys a relatively low-cost, well-skilled and educated labor force. By the way, the low public debt, the comfortable foreign exchange reserves and a current account surplus make the country\’s economy a destination of choice for FDI. In that way, many investors see Russia as still under-exploited potential.

 

Outwardly, the Russian market seems to be vey attractive, but it was without mentioning that in 2014, the United States and European Union have implemented several drastic sanctions against the country. Under such circumstances, restrictions applied to new equity investment, which include production facilities. All this tensions, creates a complicated and globally unstable investment climate for investors. Besides restrictions, the Russian economy remains highly dependent on oil and commodity prices as well as imports of capital goods and foreign technology. The country underwent as well, complicated accounting rules and legislation. The weak property rights, the outmoded labor code and the high cost of borrowing is a real cause for concern and many sectors considered strategic are closed to foreign investment, which constrains economic growth progress and deter foreign investment.
Aside of those challenges, is important to consider that, English, is not widely spoken outside universities and international companies, even in large cities such as Moscow and St. Petersburg. Thereby, the language barrier can be not convenient for futur investors, especially to create new business contacts.

 

As the Russian government undertakes new reforms to attract FDI, Russia’s automotive market continued to recover in 2018, growing by 12.8%. A lot of investors believe that the Russian market has a significant potential in the long run due to low size of car park per capita, the ageing car park and the rise of automakers’ captive banks. However, the weakness of the market can be describe by the fact that car manufacturers have to raise their prices to make up for increased expenses on imported auto parts that comprise a substantial portion of car costs, doubling sometime the inflation rate.

Nevertheless, in