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. Last Updated: 07/27/2016

Gref Hails Roaring Economy

The country's economy is at a crossroads despite growing at spectacular rates in the first quarter of 2007, Economic Development and Trade Minister German Gref told a Cabinet meeting Thursday.

"Either we follow our old growth path [relying on energy resources] ... or we start on a path of growth fuelled by innovation," Gref said while presenting a new three-year economic forecast, which will serve as the basis for the budget.

The forecast, details of which were previously known, sees economic growth slowing from 6.5 percent in 2007 to 6.1 percent in 2010, assuming the average price for Urals, Russia's main oil export blend, falls from $61 per barrel in 2006 to $50 in 2010.

Russia is switching to a three-year budget cycle next year to smooth the transition after President Vladimir Putin steps down.

"The model of growth based on export of hydrocarbons has come to its limit and needs a major adjustment," said Gref.

The government currently seeks to maintain growth rates by channeling some of the windfall revenues from oil exports into nonenergy sectors such as infrastructure.

The economy grew by 7.9 percent in the first quarter of 2007, compared with 5 percent in the same period of 2006, Gref said. Industrial output, a cause of disappointment throughout 2006, grew by 8.4 percent.

"The really striking change of the last six months is the investment acceleration. There is all evidence it is a genuine trend and not a weather-related bleep," said Rory Macfarquhar, managing director at Goldman Sachs in Moscow.