The World Economic Forum has cautioned that Russia's economy is at a crossroads and significant changes are needed in order to stabilise and sustain growth and prevent social unrest.
In WEF's benchmark Scenarios for the Russian Federation report, the group outlined three scenarios for the Russian economy, which all paint a bleak outlook unless significant changes in its domestic institutional environment are made as the country's GDP is so closely tied to oil prices.
Russia has enjoyed record growth rates and a dramatic rise in living standards for much of its urban population after the spectacular rise in oil prices from 2000 to 2008, in tandem with economic reforms of the early 2000s, fostered a more stable environment [Figure 1].
Despite being hit hard by the global economic crisis in 2008 and 2009, the country even managed to rebound from an 8 percent drop in the economy, within a couple of years.
But as IBTimes UK detailed in December last year, Russia faces a drop in 2013 GDP to 2.5 percent, from 3.4 percent in 2012.
Forecasts also detail a 1.6 percent rise in inflation to reach 6.7 percent by the end of this year for Russia.
Supporting this, WEF says that this growth trajectory is not sustainable
and significant challenges remain, particularly in reducing the country's strong reliance on its oil and gas exports and in revitalising the economy