OREANDA-NEWS Moody's Investors Service has released a comprehensive report on the Russian economy, analyzing its capabilities and key risks in the medium term.

"The dominance of the public sector and monopolization hinder the growth of investment and productivity," Moody's said. The Agency's analysts estimate the share of the public sector in the Russian economy at 40-50%, taking into account partially privatized companies.

"The high proportion of state ownership creates unequal conditions for business activity, exacerbating other factors that inhibit entrepreneurship, such as weak property rights and the relative lack of the rule of law," analysts write.

The quality of Russian institutions as a whole remains low, Moody's notes, referring to the quality of public administration index, which is calculated by the World Bank.

"Russia's low rates of corruption and the rule of law are most likely due to the inefficiency of the judicial system and the government's significant influence on the business environment and decisions, especially when it comes to large quasi — state corporations and banks," Moody's points out.

Separately, Agency analysts identify risks for IT companies. As in other countries of Eastern Europe, Russia has developed a strong it sector over the past 20 years, which has provided 2.5-fold growth in exports of computer and it services from 2008 to 2018.

The demographic situation in Russia constrains the potential for economic growth, indicates Moody's.

Nevertheless, Moody's experts believe that socio-economic instability and military conflicts near the borders of Russia will contribute to the flow of population from the affected regions and Russia is likely to remain the beneficiary of such geopolitical tensions. Thus, a steady influx of able-bodied migrants from Central Asia and Ukraine will alleviate the labor shortage.

In addition, the pension reform launched in 2019, according to Moody's, will help stabilize the number of able-bodied population in the medium term.