Russia's GDP to grow by 7% in 2007: IMF

The Russian economy has once again outperformed expectations, and is set to grow by 7% this year. These are the latest predictions from the International Monetary Fund which says along with India and China, Russia is contributing to a bumper year for the

The Russian economy yet again races ahead of expectations. But what's powering this growth?

“Raw materials and energy resources constitute a high share in Russia's economic growth. The export prices for oil still largely define Russia's economic state and its prospects,” Irirna Penkina, Sobinbank economic analyst, said.

But this paints a picture that could be too simplistic.

Russia is also going through a very visible consumer boom, partly funded by an increasingly functional banking system. Foreign direct investment is growing, whilst Russian companies are attracting foreign money through loans and IPOs. Most surprisingly, industrial output has risen 10% in a year.

After the crisis of 1998, Russia has enjoyed nine years of uninterrupted economic growth at an average of nearly seven percent a year.

However, for years, economists have warned Russia that oil and gas will only take it so far. For now, it's easy to hide the underlying structural problems in the Russian economy. 

But it also needs to create a more transparent business sector, and to maintain a disciplined budget.

So, is the locomotive of the Russian economy about to come to a screeching halt?

“Recently, Russia has shown a consistent rate of economic growth, and economic stability, and I expect that this will not change in the future,” Irina Penkina added.

Maybe, not straight away. But Russia does have to develop its role in the global economic system and the government believes that Russia's true destiny will be as an innovation economy, using its well-educated workforce to create profitable ideas.

The government's pledge of more than $US 5 BLN to nanotechnology, and one of the world's fastest growing IT industries are testament to this.

Whilst oil and gas are still the mainstays of the Russian economy, the race is now on to create new industries that will take their place in the future.