THREATS AND CHALLENGES IN THE RUSSIAN ECO NOMY

After the Russian production slow-down has stopped, the economic size of the country is some four times larger than Finland's. The future po sition of the country depends on expected growth rates. In Poland fast growth has been based on new private activities and market-based adju stment of state-owned companies. Would Russia repeat the experience? T here are much less new private activities in Russia compared to Poland . The explanation seems to hinge upon the economic and political role of the Russian state, which sooner prevents than supports entrepreneur ship. This will not be overcome any time soon. Neither is the path of increased utilization of existing capacities promising. The capital st ock inherited from the USSR was smaller and older than often believed. Actual past investment flows have not been sufficient to maintain it, and its economic value has anyway collapsed due to shifts in relative prices as planners' preferences have given way to market demand, ener gy prices have surged and transport costs have been introduced. Though statistics show quite high domestic saving and investment ratios, the re is ample evidence that this is overestimated. Household savings may tend to decrease. Therefore, Russian investment-constrained economic growth will be modest at best. This has crucial economic, social and s ecurity implications.