In 1991, Russia's parliament enacted legislation aimed at fully privatizing the commercial and service sector by 1994 and placing about half the medium and large companies in private hands by 1995. By the end of 1992, about 6,000 firms had applied to become joint-stock companies, and 1,560 had completed the process; almost one-third of Russia's approximately 250,000 small businesses had been privatized. Housing privatization began late in 1992, and over 2.6 million apartments—about 8% of the total—had been privatized by the end of 1993. In 1996, the government claimed that the nonstate sector produced approximately 70% of gross domestic product (GDP), up from 62% in 1995. Russia's Communist-dominated parliament, however, was quick to criticize the government's privatization efforts which they thought were responsible for the economic decline. In March 1997, over two million people took part in a national strike protesting the economic hardships of privatization and over 100,000 attended rallies in Moscow and St. Petersburg. The government, however, was committed to privatization and largely ignored the parliament and the protests.
During the financial crisis of 1998, Russia became the first modern country to default on its debt. The subsequent collapse of the ruble and investor flight left analysts concerned that Russia would face famine and even governmental collapse. Instead, a period of fiscal restraint restored growth to the Russian economy although it remains vulnerable to sudden fluctuations in the world market. Russia in the early 2000s remained current on its foreign debt; service of the foreign debt amounted to around $14 billion in 2002.
Russia's GDP increased by 4.3% in 2002 over 2001. Lowered inflation and high oil prices fueled that growth. Unemployment and underemployment remain problems, however. In 1998 the government passed an improved bankruptcy code, and in 2001, the Duma passed a deregulation package, to improve the business and investment sector. A new corporate tax code went into effect in 2002. Cumulative foreign investment increased by 20% in 2002, but was mostly due to increases in loans and trade credits. The banking system is poorly developed, which inhibits economic development. In 2002, the US Department of Commerce designated Russia a "market economy," and the country has been invited by the G-7 nations to take part in negotiations, causing the group to be named the G-8.