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Russia confident on economy despite slowdown
By Darya Korsunskaya
MOSCOW, Feb 7 (Reuters) - Russia said on Thursday the economy was set for more growth in 2002 after two years of boom, despite signs of a recent slowdown and soaring inflation.
Russia, hit by crisis in 1998, has grown fast since then and Prime Minister Mikhail Kasyanov opened a cabinet meeting on the 2002 outlook on a positive note.
"We have no fear about the balance of payments. We have every reason to say that the economy will grow," he said.
But he made no mention of 3.1 percent inflation in January, well above market and official forecasts, and which the daily Kommersant newspaper described as "the forbidden theme."
Deputy Economy Minister Arkady Dvorkovich played down the figure, the highest since February 1999, and said the government was still on target to meet its inflation goal.
"The government is sticking to its forecast of 12 to 14 percent (by the end of this year)," he told reporters after the meeting.
He said the spike in prices last month was caused by one-off factors, such as a rise in communal charges and railway prices. Stripping these out, real January inflation was 2.7-2.8 percent.
He said the government would try to restrain inflation by braking rises in state regulated prices by power and gas firms.
Dvorkovich said these would not be increased again this year, although the government has said they would look at the issue of further rises in the middle of the year.
GROWTH STALLED LATE LAST YEAR
Kasyanov's confidence was based on economic expansion of five percent last year after a record rise of 8.3 percent in 2000. Growth of around four percent is expected this year.
But the Economy Ministry painted a bleak picture of the last few months of 2001 in a report prepared for the cabinet meeting.
Russia had done well to grow in 2001 despite a fall in oil prices and global recession, but it added: "At the same time, especially in the last months, several negative trends emerged."
"It is especially necessary to note a slowdown in economic growth in the second half of the year and even a halt to growth in the fourth quarter," it added.
The ministry gave various 2002 scenarios, including a new one for what would happen if the average price for oil was $16.5 a barrel, lower than a previous worst-case expectation of $18.5.
Under the lower price, GDP would rise 3.1 percent and industrial output 2.8 percent after 4.9 percent last year.
It said the main problems were caused by external factors such as the global slowdown as well as the rise in the real rate of the rouble, which although falling against the dollar on the markets has risen strongly in real terms.
It said manufacturing companies had also faced rising costs due to hikes in prices for power and gas and rising wages.
The government needed to bring down inflation and would try to do this via monetary policy by having a budget surplus to soak up cash in the economy and structural measures to increase competition and investment, it said.
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