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. Last Updated: 07/27/2016

Gref Doubts Putin's Inflation Goal

Economic Development and Trade Minister German Gref on Thursday cast doubt on Russia's ability to quickly bring down inflation, one of the ambitious economic goals that President Vladimir Putin highlighted in this week's state of the nation address.

Gref said that the goal of bringing the country's inflation down to 3 percent within the next few years, which Putin announced in his speech Wednesday, was "hardly expedient," Interfax and Itar-Tass reported.

He said a better target would be achieving a 4.5 percent inflation rate by 2007, and a 3 percent rate after 2008.

Gref warned that rapidly lowering inflation to 3 percent "could have a negative effect on the Russian economy" and "could only freeze structural reforms," Itar-Tass quoted him as saying.

He said Putin's call to speed up the doubling of the nation's GDP, moving up the target date from 2012 to 2010, was "a realistic but highly complicated task."

"This cannot be done solely by the hands of the government: There needs to be a consolidation of all the levels of power, business, society and the scientific community," Interfax quoted him as saying.

The government approved plans Thursday to increase gas, power and rail prices next year as it seeks to wean state monopolies off major subsidies.

The biggest increases will come in prices charged by gas monopoly Gazprom, which under a deal struck last week with the European Union on joining the World Trade Organization are set to double by the end of this decade.

Price hikes are vital to make the state monopolies economically viable and, in particular, ready Unified Energy Systems to be broken up under a liberalization of the power market slated for 2007.

But they also mean that it will take several years before Russia can meet Putin's inflation target.

Gas prices will rise by 20 percent in 2005, after a similar increase this year.

Power tariffs charged by UES will rise by 9.5 percent next year -- down from an earlier-proposed 10 percent -- and compared to a 13 percent rise this year. Russian Railways Co. will raise its prices, based on an inflation-linked formula, by 6 percent to 8.5 percent in 2005, compared to 12 percent this year.

(AP, Reuters, MT)