Russia to Massively Increase Infrastructure Investment in Line with Chinese Spending

Russian GDP per capita income set to rise to be three times higher than China’s  

Russian President Vladimir Putin gave his annual address to the nation yesterday, with the economic and business sectors receiving some much needed boost. “Russia must not only firmly entrench itself among the world’s largest economies but, by the middle of the next decade, increase GDP per capita by half,” President Putin stated.

That gives Russia a target of US$16,650 GDP per capita income to achieve by 2025, comparable with several EU nations today and significantly higher than EU countries such as Lithuania, Poland, and Hungary. It is also about three times higher than China’s existing GDP per capita figures.

President Putin also said Russia needed to increase spending on healthcare to five percent of gross domestic product. He set the targets during the domestic policy portion of a speech in which he also adopted a stance consistent with that of global institutions such as the World Bank, who have said that Russia must improve living standards and lift state spending on education and healthcare, both of which currently account for less than four percent of GDP.

President Putin said Russia would also spend more than 11 trillion rubles (US$193.77 billion) on roads and related infrastructure over the next six years. Another 3.4 trillion rubles would be spent on unspecified measures to improve Russia’s demographic situation. These figures are comparable to the US$323 billion that China spent on its own infrastructure in 2017, and actually represent a similar investment figure per head of population for Russians as Beijing allocated for all of China.

Russians should also be better paid to be able to afford housing, and mortgage interest rates should fall to 7 percent from slightly below 10 percent now, President Putin said.

Russia is on track to post a budget surplus for the first time since 2011 this year, while its treasury bonds are in strong demand globally, which gives Moscow room to rework budget costs.The finance ministry’s 2018 plan is to raise US$3 billion on the global market and another 1.4 trillion rubles on the debt market at home. It is under less pressure, however, since a recent increase in oil prices has spurred petro-dollar inflows into the budget.

Russia is one of the world’s largest suppliers of oil and gas, and also possesses the world’s largest gold and diamond reserves.

“Russia’s wealth in natural resources remain despite the sanctions imposed upon it by the West, with China a major buyer. The nation is also entering a new and dynamic trade and infrastructure development phase in engagement with Asia,” says Chris Devonshire-Ellis of Dezan Shira & Associates. “With the President announcing a spend of hundreds of billions of dollars in infrastructure alone, the opportunities for businesses involved in this field are immense. Now is the time to research the Russian opportunities and see what is there for corporate co-operation and opportunity investment with Russian businesses.”

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