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. Last Updated: 07/27/2016

Growth Seen Strong Despite Global Jitters

Global financial jitters will not hamper Russian economic growth as companies continue to invest, while a liquidity squeeze may help the Cabinet fight inflation, a poll of 11 economists showed Friday.

Economists saw full-year 2007 economic growth at a median of 7.5 percent, unchanged from last month's forecast, and consumer price index growth at 8.5 percent, above the official target of 8 percent but slightly below last month's 8.6 percent.

"Despite lower corporate borrowing due to worsening external factors, Russian firms' investment activity will remain strong," said Anton Stroutchenevski, economist at Troika Dialog.

"This, among other factors, will help economic growth," he added.

Economists saw capital investment growth at a median of 19 percent in 2007, up from 16 percent in last month's poll, but did not specify how firms would finance their capital expenditures amid worsening global credit conditions.

Russian firms have borrowed heavily abroad in recent years, taking advantage of low global interest rates and Russia's investment-grade credit ratings. The firms may now face problems refinancing their enormous foreign debt, analysts say.

Economists also saw money supply growth rates slowing to 48.5 percent in the full-year 2007 from over 60 percent earlier this year as foreign investors pull their money out of Russian assets.

"Money supply growth rates will most likely fall because of the subprime crisis," said Vladimir Bragin, analyst at Trust Bank.

The country has seen a major reversal of capital flows and is estimated to see a net private capital outflow of $10 billion in August. The Central Bank expects inflows of $70 billion in 2007.

The country's gold and foreign exchange reserves, the world's third-largest, fell this month, but economists still expect them to grow to $440 billion by the end of 2007 from the most recent $413.8 billion.

Economists saw the ruble strengthening by 0.5 percent by the year's end.