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Russia's gross domestic product grew 7.9%
Russia's gross domestic product (GDP) grew 7.9%, year-on-year, in the first quarter of 2007, the Russian economics minister said Thursday. In January-March 2006, GDP increased 5.0%, German Gref told a government meeting. "The first quarter is characterized by a new wave of accelerated economic growth," Gref said. The GDP's strong growth at the beginning of 2007 enabled the economics ministry to raise its original forecast of economic growth in 2007 from 6.2% to 6.5%. Net capital inflow into Russia increased 150% in January-March 2007, year-on-year, to $18.3 billion, Gref said. Net capital inflow into Russia hit a record level of $41.6 billion in 2006. At the same time, illegal capital outflows from the country decreased 69%, to $2.8 billion in the reporting period, from $9 billion last year, Gref said. Wages in Russia grew 18.4% and real incomes were up 13.0% in the first quarter of 2007, compared with the same period of 2006, Gref said. However, wages are growing two times faster than labor productivity, the economics minister said. "That is a very alarming trend. The gap [between growth in wages and labor productivity] is only increasing, Gref said, adding that this factor was slowing economic growth and increasing inflationary pressure. The economics ministry projects inflation at 0.6%-0.8% in April 2007, Gref said. "The first half of April showed that inflation this month could be 0.6-0.8%. From April 1 through April 16, it measured 0.3% compared to 0.4% in the same period of last year," Gref said. According to Russia's monetary policy guidelines for 2007, inflation is expected to slow down to 6.5-8% from 9% in 2006. Industrial output expanded 8.4%, year-on-year, in January-March 2007, making a major contribution to accelerated GDP growth, Gref said. The ruble's real effective rate to the dollar/euro currency basket gained 2.6% in the first three months of 2007, Gref said. "This is much lower than in the first quarter of 2006 when the ruble's real effective rate grew 6%," Gref said. The government projects the ruble's real effective rate growth at 5.1% in 2007, Gref said.
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