Will oil prices fall in 2004?

Sustained high prices for oil, Russia's main export earner, have given the economy a lift.

The figure is one of the strongest performances in five years of recovery from Russia's 1998 economic crisis.

The rapid end to that crisis has been one of the main factors underpinning the popularity of President Vladimir Putin, who came to power in 1999.

Safe assumption

The Russian Government is still assuming that growth will slow down in 2004, however.

Surging oil output has driven growth

It is working on an assumed oil export price of $25 per barrel, at least $5 below where it has been throughout 2003.

As a result, the official forecast for this year's gross domestic product growth is 5.5%.

This may prove overly pessimistic, however, especially since post-1998 reforms are said to have made the economy generally more flexible and efficient.

The government says it has begun to deal with red tape, in particular by lowering and simplifying the highly complex tax system.

It has also chased out many of the "oligarchs", powerful businessmen who parcelled out most of the country's key assets during the 1990s.

Ups and downs

Many analysts query, however, whether Russia's fundamental economic prospects have in fact improved under Mr Putin.

Reforms have not been up to expectations, critics say, and in general the state has been too keen to interfere in the affairs of the private sector.

Without thorough market reform and the consequent development of a broad commercial base, the Russian economy will remain vulnerable to swings in the global oil price.