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. Last Updated: 07/27/2016

Gref Sounds Positive Note on Cash Flight

ReutersGerman Gref
The country saw net private capital outflow of $7.6 billion in August, lower than earlier forecast, Economic Development and Trade Minister German Gref said Monday, RIA-Novosti reported.

"According to preliminary data, [net outflows] should have been at $9 billion, but now this figure is at $7.6 billion. Such an outflow is small," Gref said at the weekly Cabinet meeting with President Vladimir Putin.

The country saw record capital inflows in the first half of this year but the trend has reversed and investors have started pulling their money out of Russian assets as turbulence has spread on global financial markets.

Senior government officials had previously estimated August capital outflows at $10 billion and some analysts have said the figure could be even higher. A more modest figure suggests the country has fared better than expected during the liquidity crunch.

Officials still forecast net private capital inflows at $70 billion this year and say financial jitters caused by the subprime mortgage crisis in the United States will not have a significant impact on Russia.

"We do not see serious global risks," Gref said.

"I agree with this opinion," Putin said at the meeting, commenting on Gref's statement. "Taking into account the large $70 billion inflows before, such a correction is normal."

Gref said Russia would even raise its official gross domestic product growth forecast for 2007 to 7.2 to 7.4 percent from the current 6.5 percent.

"Most likely we will hit growth of 7.2 to 7.4 percent before the end of this year," Gref said, news agencies reported.

Other Cabinet officials have already said economic growth will exceed 7 percent in 2007 but the Economic Development and Trade Ministry has so far stuck to its old forecast. Gref said the official forecast would be changed before the end of September.

A strong growth forecast suggests that the Cabinet does not expect capital outflows to affect investment, a key factor behind high rates of economic growth.

Gref said inflation remained a problem although the August consumer price index growth was close to zero at 0.1 to 0.2 percent.

The State Statistics Service is due to release official August inflation data this week.