MOSCOW - Russia's economy chief has raised the nation's growth forecast for the next year by more than one percentage point only days after President Vladimir Putin scolded him in public for moving too slowly on reform.
Russia's Economic Development and Trade Minister German Gref said his earlier forecast of 5.2% growth for next year was off and could now be raised to 6.4%.
He attributed the change to the continuing strength in global oil prices Russia's main export that has fueled economic growth during Putin's first four years in power.
Russia's gross domestic product (GDP) rose by 7.3% last year and Putin, days after his overwhelming reelection on March 14, met Gref and other top economy ministers, ordering them to ensure annual economic growth of at least five%, and preferably higher.
Putin's comments appeared to be directed personally at Gref, a liberal who has been more cautious in his approach to growth figures due to a potential fall in oil prices.
But the Interfax news agency quoted Gref as saying Thursday that the economy next year should grow by 6.4% while inflation should drop to between 6.5 and 8.5% over the next two years the first time inflation would drop to single digits in the post-Soviet era.
Prices rose in Russia by 12% in 2003.
******** GOVERNMENT APPROVES ECONOMIC DEVELOPMENT SCENARIOS FOR 2005-2007
MOSCOW, March 25, 2004 (RIA Novosti) - At its Thursday session, the Russian government approved most of the development scenarios of the national economy for 2005-2007.
Minister of Economic Development and Trade German Gref told reporters that Russia's GDP growth was forecasted to reach 6.4% in 2004, and 6.2% in 2005.
According to the minister, the rate of inflation is expected to make 6.5-8.5% in 2005. In 2007, it is to go down to 4-6%, and by 2010 - to 2-4%. The ministry's forecast says that the inflation will make 10% this year.
The strengthening of the ruble against the dollar will account for 8.7% this year, and 2.5% in 2005, and the real strengthening of the effective ruble exchange rate in 2004 will stand at 7.9%, and in 2005 - 5.2%. The index of the real exchange rate of the ruble against the dollar is forecasted to be 99.1% in 2005, with subsequent strengthening by 2.1-2.3% by 2007.
According to the Ministry of Economic Development and Trade, the average oil price for 2004 will make $27.5 per barrel. According to Mr. Gref, the forecast of oil prices was corrected on Wednesday in view of updated forecasts of the leading international agencies.
In 2005, according to the optimistic scenario, the Ministry of Economic Development and Trade forecasts the oil price at $26 per barrel. According to the pessimistic forecast, in 2004 the average oil price will make $23.5 per barrel, and in the subsequent years - $20 per barrel.
In 2004, Russia plans to export 242 million tons of oil. In 2005 this figure will grow up to 247 million tons, in 2006 - to 253 million, and in 2007 - 260 million tons. According to the minister, Russia may extract far more oil but its export is limited by the transport infrastructure. "If we resolve this problem, exports may grow," said Mr. Gref.
According to him, the growth margin for tariffs in Russia in 2005 will be as follows: gas tariffs - 20%, electricity - 10%, and cargo railway freight transportation - 9%. At the same time, Mr. Gref said that the government would be analyzing budgets and investment programs of natural monopolies in May, and might lower the growth ceiling.
The minister also said that investment in the Russian economy would double in the next four years - from $71 billion in 2003 to $145 billion in 2007. According to the government, direct foreign investment will go up to $9-9.5 billion.
Scenarios of the Russian economic development for 2005-2007 will be finalized before April 1, with due account for the recommendations voiced at the government session, and then the document will be submitted to ministries and departments, and to the regions.
On the basis of this document, ministries and regional authorities will present their views on the development of industries and regions. This material will lie at the basis of the socio-economic forecast for 2005 and for a medium term, said Mr. Gref.
According to him, the government will consider the scenarios for the second time in May, and for the third and final time - in July, before the final approval of the 2005 draft federal budget by the government.
Mr. Gref noted that the budget process that began today with the adoption of scenarios ran on schedule.
******** Russia aims to reduce economic dependence on external factors ITAR-TASS March 25, 2004
The Russian government is to try and reduce the national economy's dependence on external factors, ITAR-TASS news agency reported on 25 March.
Deputy Prime Minister Aleksandr Zhukov told a sitting of the Cabinet of Ministers that the government would endeavour to lessen the economy's dependence on the situation on the world market, the agency said.
Nevertheless, Russia would be mapping out its 2005 budget parameters on the basis of world prices for Urals oil, the agency said in a separate report, quoting Economic Development and Trade Minister German Gref. The draft budget would assume a world market price for Urals oil of 26 dollars a barrel, the minister said.
The government would also bear in mind the "pessimistic" option of a drop in world oil prices to 23.5 dollars a barrel this year and 20 dollars in 2005, Gref said.
The agency also noted that Gref expects Russian oil exports to "continue to grow steadily". Gref said that, according to his ministry's forecasts, oil export volumes will be 242m tonnes this year, 247m tonnes next year, 253m tonnes in 2005 and as much as 260m tonnes in 2007.
********* Minister says investments in Russian economy to double in next four years ITAR-TASS
Moscow, 25 March: There will be a 100-per-cent increase in the volume of investment in the Russian economy in the next few years, Economic Development and Trade Minister German Gref said today.
According to ministry forecasts, the volume of investments could rise to 145bn dollars in 2007 compared with 71bn in 2003. "Investments will therefore double within four years," Gref said.
He noted that the trend for investment growth in Russia to rise more rapidly than growth in GDP would continue in 2005-2007. In particular, investment growth would be around 11 per cent in 2005. Last year this figure was 12.5 per cent, compared with 2.6 per cent in 2002. The minister said the substantial growth in investments in the Russian economy was an important factor in economic growth.
As for direct foreign investments, the Cabinet of Ministers has predicted that these may rise to 9-9.5bn dollars.
******** Deputy PM says Russia on course to double GDP in medium term ITAR-TASS
Moscow, 25 March: The Russian government believes it is possible to double GDP within the set timescale, Deputy Prime Minister Aleksandr Zhukov said today at the end of a government sitting. "The Russian government sees this as one of its main medium-term tasks," Zhukov stressed as he told journalists about the sitting.
The Russian government gave its overall approval to the economic development scenario for 2005 and the period up to 2007. According to this document, GDP is to go up by 6.2 per cent in 2005. This prediction permits talk of doubling GDP in the near future, Zhukov said.
He said the government would work to improve the Cabinet of Minister's action plan for the more efficient development of the economy. There are plans to find additional sources of economic growth and to increase the parameters for predicting growth in GDP accordingly, Zhukov said. He noted that the Economic Development and Trade Ministry had developed two versions of its 2005 forecast and growth of 6.2 per cent in GDP could be called "fairly high".
The deputy prime minister said that the government has the serious and ambitious task of increasing the population's real incomes by 40 per cent by 2007. In the medium term, the government intends to achieve a substantial rise in quality of life and to halve the number of people living below the poverty line. Zhukov believes that solving this task can be achieved by withdrawing concessions and replacing them with financial compensation to people in need and the poorest sections of the population.
The deputy prime minister also said that economic growth in 2005 would be largely formed from internal investment and not just in oil and gas. "This will gradually reduce the Russian economy's dependence on the world market situation," Zhukov said.
[ITAR-TASS news agency, Moscow, in Russian 1036 gmt 25 Mar 04 quoted Economic Development and Trade Minister German Gref as saying that the government would be taking a number of measures to boost the incomes of the poorest sections of the population during the next three years. He said that replacing concessions with money could raise R160bn that could then be allocated from the budget to the country's poorest people, ultimately leading to an increase in their incomes.]