Banks are optimistic on Russia's economy ahead of Sunday's election, but problems remain rife

As Russia prepares for its presidential election on Sunday, its economy remains a primary consideration for voters.

But despite long-running economic burdens ranging from entrenched corruption and low growth to Western sanctions and fluctuating oil prices, UBS and J.P. Morgan see cause for confidence in the country's near-term future.

Russia has recovered from its two-year recession, growing an estimated 1.4 percent last year, according to UBS, a growth driven largely by improving domestic demand and investment. The bank expects its gross domestic product (GDP) to continue growing for the next two years.

Incumbent President Vladimir Putin, who is expected to win in a predictable contest in which viable opponents were barred from running, enjoys high popular approval ratings of near 80 percent, according to polls. The election's democratic credentials have been widely criticized, both domestically and internationally.

But while Putin's continued tenure won't be a surprise, a new and potentially reformist cabinet will be central to defining any future structural reforms.

"We are positive on the growth prospects for the Russian economy as we expect consumer spending to remain robust as real wages increase," said Diana Amoa, emerging markets debt portfolio manager at J.P. Morgan Asset Management.

The election outcome could see a cabinet "more inclined towards fiscal spending which would be an additional tailwind for growth," she added. "But, overall, we expect policy continuity on the macroeconomic front."

Outlook for the ruble is positive, and J.P. Morgan forecasts it staying relatively stable "with a slight appreciation bias" as steady oil prices attract portfolio inflows into the economy.

Ultimately, however, the ruble's risks are less macroeconomic and more geopolitical, which the bank admits is harder to predict.

Serious challenges remain, with growth potential remaining low given structural constraints like low energy prices, an aging population, low efficiency and ongoing Western sanctions. And although many Russians still love Putin, polls show the country's economic performance garners less enthusiasm.

Despite some growth concentrated in Moscow, real wages outside the capital have been falling for the past three years, said Daragh McDowell, principal Russia analyst at Verisk Maplecroft.

"There is a general sense that people 'in the regions' are getting increasingly fed up with the deterioration in living standards," he told CNBC. He described Russia's growth outlook for the next three years as "mediocre at best."

While inflation has stabilized and there appears to be a revival in the agricultural sector, the key handicaps on Russian economic growth are the same as they've been since the Soviet Union's collapse: insecure property rights, weak rule of law, and corruption.

But don't look for reforms on these anytime soon, said McDowell. "As Putin's system of government depends on all these factors both to retain and exercise power, reforms remain unlikely."