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. Last Updated: 07/27/2016

2002 Growth 'Will Be at Least 4%'

The Central Bank expects the country's economic growth to slow to 4 percent this year and aims to trim real ruble appreciation, which is seen as eroding the nation's competitiveness, the bank's first deputy chairman said.

"Economic growth will come in at around 4 percent, although this is a cautious estimate," Oleg Vyugin said in an interview Friday.

According to the latest estimates of the Economic Development and Trade Ministry, growth could slow to 3.6 percent, despite calls by President Vladimir Putin to speed up expansion to narrow the yawning gap with Western economies.

Russia has enjoyed two years of robust economic growth, in part due to high world prices for commodity exports, notably oil. Its gross domestic product soared a record 9 percent in 2000.

But growth was slowed in the last quarter of 2001, when oil prices fell sharply, reducing the pace of economic expansion to 5 percent for the full year.

"The current economic situation is not bad, as there is a strong motivation for business to grow and develop. But at the same time there remain a range of restraints that have not been removed yet," Vyugin said.

Faster growth was now being held back by a lack of investment in manufacturing, an underdeveloped small and medium-sized business sector and falling consumer demand, Vyugin said.

Vyugin said exports were being undermined because the ruble was appreciating in real terms too quickly.

But he predicted that the currency's advance would slow this year to 5 percent from more than 9 percent in 2001.

"Neither the Central Bank nor the government desires a sharp real appreciation of the ruble, as with oil prices high there are fears that its strength will lead to fast growth of imports and depress domestic production," Vyugin said.

The ruble has been steady since the start of the month, despite the Finance Ministry's hopes to slow its real appreciation to 3 percent this year.

The ruble has been depreciating in nominal terms but at a slower pace than the double-digit inflation, which, according to official estimates, is expected to hit 12 percent to 14 percent this year.

Vyugin repeated his forecast of 15 percent inflation in 2001.

"At the end of the year the dollar will cost 33 rubles, possibly a bit more," he said.

"With December [2002] year-on-year inflation coming at 15 percent, the ruble will appreciate in real terms by around 5 percent," Vyugin said.

The ruble lost three-quarters of its value in a 1998 financial crisis, which boosted Russian producers by making imports more expensive and exports more competitive.