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. Last Updated: 07/27/2016

Inflation Forecast Revised

The inflation rate may exceed 11.5 percent this year, more than the government's 10 percent target, because food prices are rising faster than planned, Andrei Klepach, director of economic forecasting at the Economic Development and Trade Ministry, said in an interview with Interfax.

"If we follow the current trends, then we'll see inflation between 11 percent and 11.5 percent or even higher" in 2005, Klepach said in the interview, which was published Wednesday on the ministry's web site.

The government wants to bring the inflation rate below 10 percent from 11.7 percent in 2004 and 12 percent in 2003 to sustain economic growth and boost living standards. The economy is expected to grow an annual 5.5 percent, less than the 6.5 percent initially planned, Economic Development and Trade Minister German Gref said last week.

"The most weighty factor in inflation is a high increase in food prices," Klepach said.

President Vladimir Putin said this week that increasing revenue from sales of oil would make it harder to meet the government's inflation target this year.

Urals crude, Russia's major export blend of oil closed at $54.35 a barrel on June 20, compared with $30.99 a barrel on June 21, 2004. The government has overestimated the effect of oil and metals prices on growth, Klepach said.

"While at the end of last year we expected that GDP would increase 5.9 percent in 2005 if the oil price was an average $33 a barrel, our optimistic forecast now is 5.8 percent economic growth at an average oil price of $43 per barrel" in 2005, Klepach said.