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. Last Updated: 07/27/2016

Inflation Ends at 18.6%, Seen Falling

Russia ended 2001 with annual inflation of 18.6 percent, slightly down on the previous year, but expected to fall more strongly in 2002.

Analysts said the printing of money fueled prices by the Central Bank to buy dollars from Russian oil exporters for the country's foreign currency reserves.

This will continue to be a factor in 2002, along with planned rises in gas and power prices.

The December 2001 figures, issued by the State Statistics Committee, were in line with the committee's own forecasts and revised government expectations.

The committee said the December 18.6 percent year-on-year inflation figure included a month-on-month rise of 1.6 percent. This compared with a monthly rise in prices for November of 1.4 percent.

Inflation has been above government targets for most of the year, fueled by the high level of money printing as well as some rises in state-controlled tariffs.

Peter Boone, chief economist at Brunswick UBS Warburg, said prices this year would be strongly linked to the price of oil.

A high price would see dollars flowing into the country, leading to the creation of more rubles to buy hard currency to boost reserves further from the current $36.5 billion.

Boone put inflation at the end of 2002 at 13 percent, although this would depend on a forecast for oil prices of $18 a barrel being met. Alfa Bank said in a recent research note that its forecast for 2002 was 16 percent inflation.

"We still believe that the continuation of structural reform will fuel tariff increases over at least the next two years," it said. "In turn, this will lead to 15 to 20 percent inflation."

Paul Forrest, London-based economist at Moscow Narodny Bank, said the high inflation was also due to Russia's economic success. The country's growth has been outstripping that of the rest of the world, coming in at 8.3 percent in 2000 and expected to be 5 percent for last year.