2018 Index of Economic Freedom

Russia

overall score58.2
world rank107
Rule of Law

Property Rights48.7

Government Integrity38.1

Judicial Effectiveness46.9

Government Size

Government Spending62.5

Tax Burden85.8

Fiscal Health87.7

Regulatory Efficiency

Business Freedom77.0

Labor Freedom52.0

Monetary Freedom60.8

Open Markets

Trade Freedom79.4

Investment Freedom30.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 143.4 million
  • GDP (PPP):
    • $3.8 trillion
    • -3.7% growth
    • 0.5% 5-year compound annual growth
    • $26,490 per capita
  • Unemployment:
    • 5.7%
  • Inflation (CPI):
    • 7.0%
  • FDI Inflow:
    • $37.7 billion
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Russia’s economic freedom score is 58.2, making its economy the 107th freest in the 2018 Index. Its overall score has increased by 1.1 points, with higher scores for the trade freedom and tax burden indicators outpacing declines in fiscal health and government integrity. Russia is ranked 41st among 44 countries in the Europe region, and its overall score is below the regional and world averages.

Russia’s transition from a centrally planned economy to a more market-based system has stalled, and the country remains predominantly statist. Further economic reforms have been subordinated to the imperatives of political stability and government longevity. The private sector has been marginalized by structural and institutional constraints caused by ever-growing government encroachment into the marketplace. Large state-owned institutions and an inefficient public sector dominate the economy. The judiciary is vulnerable to corruption, and weak protection of property rights undermines prospects for optimal long-term economic development.

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Background

After decades of Soviet economic and social stagnation, poorly implemented reforms in the 1990s that failed to address a rigidly controlled financial system and antibusiness regulatory regime caused GDP to plummet. In this century, Russia has shifted to an authoritarian governance model led by President Vladimir Putin. His regime seeks legitimacy through managed elections, populist appeals, and a foreign policy focused on enhancing Russia’s geopolitical influence. Commodity-based growth arrested the economic decline for a period, but growth has again stagnated with the decline in energy prices. Russia’s illegal annexation of Crimea and occupation of eastern Ukraine have led to ongoing Western economic sanctions and capital flight.

Rule of LawView Methodology

Property Rights 48.7 Create a Graph using this measurement

Government Integrity 38.1 Create a Graph using this measurement

Judicial Effectiveness 46.9 Create a Graph using this measurement

Arbitrary expropriations for political reasons highlight the precarious nature of property rights in Russia. The rule of law is not maintained uniformly across the country, and the judiciary is vulnerable to political pressure and inconsistent in applying the law. Corruption is pervasive throughout Russia, and a growing lack of accountability enables bureaucrats to act with impunity.

Government SizeView Methodology

The personal income tax rate is a flat 13 percent, and the top corporate tax rate is 20 percent. The overall tax burden equals 29.2 percent of total domestic income. Over the past three years, government spending has amounted to 35.3 percent of total output (GDP), and budget deficits have averaged 2.7 percent of GDP. Public debt is equivalent to 17.0 percent of GDP.

Regulatory EfficiencyView Methodology

Lack of regulatory transparency introduces significant uncertainty into the process of running a business. The rigid and outmoded labor code continues to limit employment and productivity growth. Most prices in Russia have been liberalized, but the government increased subsidies to farmers after the U.S. and EU imposed sanctions. The government also subsidizes some imports from China and some gas exports.

Open MarketsView Methodology

Trade is moderately important to Russia’s economy; the combined value of exports and imports equals 46 percent of GDP. The average applied tariff rate is 2.8 percent. Nontariff barriers impede trade. Sectoral restrictions and the prevalence of state-owned enterprises limit foreign investment. Public-sector financial institutions have further solidified their position by taking market share from domestic private banks and increasing their control of lending.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Switzerland81.70.2
2Ireland80.43.7
3Estonia78.8-0.3
4United Kingdom781.6
5Iceland772.6
6Denmark76.61.5
7Luxembourg76.40.5
8Sweden76.31.4
9Georgia76.20.2
10Netherlands76.20.4
11Lithuania75.3-0.5
12Norway74.30.3
13Czech Republic74.20.9
14Germany74.20.4
15Finland74.10.1
16Latvia73.6-1.2
17Austria71.8-0.5
18Macedonia71.30.6
19Romania69.4-0.3
20Armenia68.7-1.6
21Poland68.50.2
22Malta68.50.8
23Bulgaria68.30.4
24Cyprus67.8-0.1
25Belgium67.5-0.3
26Hungary 66.70.9
27Kosovo66.6-1.3
28Turkey65.40.2
29Slovakia65.3-0.4
30Spain65.11.5
31Slovenia64.85.6
32Albania64.50.1
33Montenegro64.32.3
34France63.90.6
35Portugal63.40.8
36Italy62.50.0
37Serbia 62.53.6
38Bosnia and Herzegovina61.41.2
39Croatia611.6
40Moldova58.40.4
41Russia58.21.1
42Belarus58.1-0.5
43Greece57.32.3
44Ukraine51.93.8
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