Today the OECD has published its Economic Survey of the Russian Federation for 2009.  The report essentially declares an end to the decade-long recovery since 1998, when the country enjoyed an undervalued ruble, spare production capacity and labor resources, and makes recommendations to government for urgent reforms in banking, exchange rate models, and regulatory frameworks for products and services.  The OECD sees a 6.8% contraction of Russia’s GDP this year, followed by a predicted recovery of 3.7% for 2010.

Some of the recommendations appear pretty painful:  cut lending rates, allowing the ruble to depreciate, and tightening up lon government spending.  How can Russia build a better growth model to catch up after getting hit so badly by the crisis?  Even the OECD points to the primacy of rule of law:  “This [model] should be one based on innovation, investment, the accumulation of human capital and coherent implementation of the rule of law within a well regulated and competition‑enhancing market economy, rather than one largely driven by strong but temporary improvements in the terms of trade and the increasing reliance on state corporations with inadequate governance structures as well as ad hoc support of selected banks and corporations.“