bt to Paris Club creditors and the IMF. Foreign debt is
approximately one-third of GDP. The state component of foreign debt
has declined, but commercial debt to foreigners has risen strongly.
Oil export earnings have allowed Russia to increase its foreign
reserves from $12 billion in 1999 to some $470 billion at yearend
2007, the third largest reserves in the world. During President
PUTIN's first administration, a number of important reforms were
implemented in the areas of tax, banking, labor, and land codes.
These achievements have raised business and investor confidence in
Russia's economic prospects, with foreign direct investment rising
from $14.6 billion in 2005 to approximately $45 billion in 2007. In
2007, Russia's GDP grew 8.1%, led by non-tradable services and goods
for the domestic market, as opposed to oil or mineral extraction and
exports. Rising inflation returned in the second half of 2007,
driven largely by unsterilized capital inflows and by rising food
costs, and approached 12% by year-end. In 2006, Russia signed a
bilateral market access agreement with the US as a prelude to
possible WTO entry, and its companies are involved in global merger
and acquisition activity in the oil and gas, metals, and telecom
sectors. Despite Russia's recent success, serious problems persist.
Oil, natural gas, metals, and timber account for more than 80% of
exports and 30% of government revenues, leaving the country
vulnerable to swings in world commodity prices. Russia's
manufacturing base is dilapidated and must be replaced or modernized
if the country is to achieve broad-based economic growth. The
banking system, while increasing consumer lending and growing at a
high rate, is still small relative to the banking sectors of
Russia's emerging market peers. Political uncertainties associated
with this year's power transition, corruption, and lack of trust in
institutions continue to dampen domestic and foreign investor
sentiment. PUTIN has granted more influence to forces within his
government that desire to reassert state control over the economy.
Russia has made little progress in building the rule of law, the
bedrock of a modern market economy. The government has promised
additional legislative amendments to make its intellectual property
protection WTO-consistent, but enforcement remains problematic.

GDP (purchasing power parity):

$2.097 trillion (2007 est.)

GDP (official exchange rate):

$1.29 trillion (