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. Last Updated: 07/27/2016

Inflation to Hit 4% By Fall, Says Livshits

President Boris Yeltsin's top economic adviser said Wednesday the government is on course to halve inflation to 4 percent by the fall and to keep it down thereafter.


April's inflation rate was 8 percent, Alexander Livshits said Wednesday, citing Finance Ministry data, down from 8.9 percent in March and 17.8 percent in January. And government policies will make the trend stick, he said.


"Usually autumn is a time when all the economic achievements of the year have collapsed," Livshits, head of Yeltsin's group of economic analysts, told a press conference. "But now we are trying our best to make this fall 'unusual' and not to have any catastrophes."


Still, Livshits' forecast was considerably more conservative than that of First Deputy Prime Minister Anatoly Chubais, who last week cited a target of below 2 percent by the end of summer.


Livshits said April's inflation was fueled by short-term factors that won't affect a general downward trend.


"One of these factors was the abolition of import privileges. But the market is rapidly adjusting to the new rules.


"Soon the situation will stabilize and we will be able to reach 4 percent [monthly] inflation rate like we did last year in August and, proceeding from the recent economic situation, keep to this level to the end of the year," he said.


According to a Finance Ministry and Central Bank joint press release issued Saturday, the budget deficit in the first quarter of the year was held to just 7.6 trillion rubles ($1.4 billion), or 3.3 percent of gross domestic product. The deficit for the entire year is projected at 72 trillion rubles, or 5.6 percent of estimated GDP.


Federal spending amounted to 39.7 trillion rubles in the first quarter, and spending to 32.1 trillion rubles, the report said.


Livshits said tax revenues had reached a "satisfactory level" but income from foreign trade duties fell short of projections by 20 percent.


"And I can characterize as a total failure small revenues from privatization in the first quarter of this year," he said.


The government has delayed the wave of privatization, waiting for the stock market to improve before parting with its more lucrative assets.


"The government is not planning to start a total sell-off of state packages of the most valuable companies, such as Rostelecom or LUKoil," he said. Livshits also acknowledged that the government is interested in the recent proposal of a newly formed Consortium of several leading Russian banks to lend a reported 9 trillion rubles to the government in return for collateral in the form of shares in the privatized enterprises.


He called the proposal "a good sign" of positive changes in the country's economic situation, but said the government has several other proposals, including from foreign banks, and is working at the moment in order to choose the best.


"We have known about this project since October 1994, so the proposal of the Consortium was not a surprise to us," he said. "But it would be unfair to follow the first proposal without looking at others."