Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

PM: 12% Inflation Goal Within Reach

Prime Minister Mikhail Kasyanov said Friday that the government's target to keep 2003 inflation under 12 percent was achievable despite an 8.7 percent consumer price rise in the first seven months of the year.

Speaking during a Cabinet meeting dedicated to economic issues, Kasyanov also noted that gross domestic product increased by 7.2 percent during the first half of the year, twice as much as in the first half of last year.

Industrial production grew by 6.8 percent, compared to 3.2 percent over the same period last year. Investment in the economy was up nearly 12 percent, compared to a 2.5 percent rise in the first six months of last year, Interfax reported.

"The quality of the economy is changing," Kasyanov said in televised remarks. But he added that the changes had not yet evolved into a long-term trend, Interfax reported.

"There are grounds to believe the target is achievable, although the task is not simple," Kasyanov told the Cabinet.

Curbing inflation has been a key struggle for the government and a major demand made by the International Monetary Fund, which has called on the Kremlin to tighten its budget policy. Last year, inflation was 15.1 percent. Analysts' inflation estimates for this year range between 12 percent and 15 percent.

The government hopes that seasonally lower prices in August and September should help them keep annual inflation in check, but most analysts say the government's target to keep inflation under 12 percent is increasingly looking too optimistic.

Analysts say that fast growth in money supply is likely to push up consumer prices later in the year with only some of it absorbed by a growing economy, investment demand and a rush into the ruble, which has been rising steadily against the weakened dollar since the start of the year.

Economic Development and Trade Minister German Gref on Friday warned of the dangers of a strengthening ruble, saying the currency's rise against the dollar was harmful for the manufacturing sector.

Gref said real ruble appreciation was 12 percent against the dollar and 5 percent against the euro so far this year. He was reluctant to comment on what measures needed to be taken to curb appreciation, adding that it was a decision the monetary authorities would make.

Gref also said it is too early to say whether a legal probe into the country's largest oil company, Yukos, had harmed the economy.

The economy has been buoyed by the high price of oil, the country's main export commodity. Some analysts have said the strong revenues have allowed the government to shirk much-needed structural economic reforms.

Analysts have also urged the government to develop other sectors of its economy. Kasyanov noted that the machine building sector accounted for almost 20 percent of industrial production growth, Interfax reported. The energy sector's contribution stood at 20 percent, compared to nearly 50 percent last year, Kasyanov said, Interfax reported.

In a government report prepared ahead of the Cabinet meeting, officials predicted that GDP growth this year will be 5.9 percent, Itar-Tass reported. Last year, GDP rose 4.3 percent.

The Finance Ministry has submitted to the Cabinet a draft 2004 federal budget forecasting a surplus of 83.4 billion rubles ($2.7 billion), or 0.5 percent of GDP, Interfax reported Sunday.

The government had previously forecast a budget surplus of 95 billion rubles for next year, but has been under pressure from lawmakers to increase spending ahead of parliamentary elections in December.

Last week, Finance Minister Alexei Kudrin pledged to raise military spending by 10 billion rubles in 2004.

Revenues in 2004 are targeted at 2.74 trillion rubles, or 17.9 percent of GDP, and spending is set at 2.66 trillion rubles, or 17.4 percent of GDP, Interfax said.

The Cabinet is expected to discuss the draft budget on Aug. 14 before sending it to parliament and the government has said it wants it approved by the end of November.

(Reuters, AP)