Kudrin Sees Capital Inflows Despite Jitters

Finance Minister Alexei Kudrin said Wednesday that he still expected net capital inflows in the second half, despite a falling domestic stock market and global financial turbulence.

Prime Minister Vladimir Putin sent shares into freefall in June with an attack on steel and coal firm Mechel. Russian shares extended their losses tracking global commodity prices.

"Naturally, capital inflows have shrunk due to a falling market," Kudrin told reporters.

"I believe that we will have net capital inflow in the second half, but today it is difficult to estimate the inflow due to the continuing global financial crisis," Kudrin added. Russia had net capital inflow of $12.3 billion in the first half.

The Central Bank has said it expects $40 billion in net capital inflows in 2008, but with investors fleeing the falling Russian market and firms finding it hard to raise capital abroad it was not clear where the inflows would come from.

"There can be various events that may have an impact on the full-year number," Kudrin said. "We will analyze all the events which are taking place in the market." Capital flows include direct and portfolio investment as well as debt issuance.