On 16 May 2007, the OECD Council decided to open discussions with the Russian Federation on accession to the Organisation and, on 30 November 2007, an Accession Roadmap, setting out the terms, conditions and process for accession was adopted [C(2007)103/FINAL]. In the Roadmap, the OECD Council requested a number of OECD Committees to provide it with a formal opinion. The Economic and Development Review Committee was requested to review overall economic policies of the Russian Federation in order to provide a formal opinion on the degree of coherence of policies of the Russian Federation with those of OECD member countries. In light of the formal opinions received from OECD Committees and other relevant information, the OECD Council will decide whether to invite the Russian Federation to become a member of the Organisation. The present Economic Survey of the Russian Federation was prepared for the purposes of the accession review of the Russian Federation. The draft report was discussed by the Economic and Development Review Committee on 29 October 2013, revised in the light of the discussions and finalised on 9 December 2013. The draft report was prepared for the Committee by Artur Radziwill and Lilas Demmou under the supervision of Andreas Wörgötter. Wide-ranging background research was provided by Yana Vaziakova with more specific inputs by John Earle, Maria Godunova, Alexander Kolik, George Kopits, Anna Kurguzova, Hartmut Lehmann and Natalia Tourdyeva. Excellent research assistance was provided by Corinne Chanteloup. Efficient secretarial support was provided by Josiane Gutierrez and Mikel Iñarritu. This is the ninth OECD Economic Survey of the Russian Federation. This Survey is published on the responsibility of the Secretary-General of the OECD.

Structural reforms to improve the business climate are key to raising potential growth and economic resilience. As energy prices stagnate and labour and capital become fully utilised, growth is falling behind pre-crisis rates. Making the economy stronger, more balanced, and less dependent on rents from natural resource extraction is therefore a key challenge. This requires higher productivity growth and greater energy efficiency, both driven by competition, stronger investment and better matching of skills and jobs. The sequencing, political economy and implementation of structural reforms are all important.

Russia made major strides in the decade before the 2008 crisis, helped significantly by oil and gas revenues. But productivity and living standards are still well below those of the most advanced market-oriented countries, and the speed of convergence since the crisis was lower than in most BRIICS countries (). Moreover, growth has slowed since 2012, partly for cyclical factors but mainly because potential output growth has slowed. The Ministry of Economic Development slashed in November 2013 its projected long-term average growth to just 2.5% down from 4.3% projected in April, warning that Russian growth until 2030 would lag behind the global average. Making further sustainable advances and fulfilling the presidential decree of May 2012 to increase labour productivity by 50% by 2018 and create 25 million highly productive jobs by 2020 will require a new pace of reforms.

Economic growth is below what would be needed to resume rapid convergence to average OECD living standards. On-going efforts to improve the business climate are laudable, but need to be widened and strengthened. Much progress has been achieved in reducing red tape, but it is only recently that the authorities have visibly become more energetic in fighting corruption. Adverse interactions between politics, business and law enforcement generate obstacles for the rule of law and remain a major risk for potential investors. High entry barriers lead to weak competition. Reducing the role of the state in the economy and WTO membership should be viewed as opportunities to strengthen competition, and hence provide incentives for productivity improvements, which are urgently required to ensure stronger growth in Russia because of a shrinking labour force. Transport can play an important role in promoting growth, diversification and regional convergence. However, with insufficient investment and incomplete structural reforms, Russia faces very large challenges in modernising its large transport system. Urban transport problems are intensifying, because of weak policy co-ordination and inadequate traffic management. Promoting competition in the transport sector is essential, in particular by effectively opening the railway freight market to independent operators.

The labour market in Russia is very flexible. Firms adjust to economic shocks through wage cuts, working hour reductions and minimisation of non-wage labour costs. Workers react by changing jobs. This results in a high and stable overall employment rate, but also high wage inequality, informality and labour turnover, which limits incentives for firms to invest in human capital and productivity improvements. While educational attainment is very high, the education system needs to be strengthened to respond to the needs of a skill-based economy. School-employer co-operation is low and opportunities for higher education are unequally distributed. Adequate funding for education institutions is not assured everywhere while inefficiencies persist.Private spending on innovation is very low and Russia underperforms in terms of scientific outputs and patents. Support for low-tech innovation and technology adoption, especially among SMEs is narrow because of a bias towards large and high-tech projects, which however are only loosely related to Russian manufacturing capacity. Reform of the public R&D sector is incomplete, notably with respect to strengthening funding on a competitive basis.