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German Gref :"The population's real incomes in 2005-2007 will grow by 8-9% a year and by 2007 will increase by 40%"
The population's real incomes in 2005-2007 will grow by 8-9% a year and by 2007 will increase by 40%, Economic Development and Trade Minister German Gref said at a government session. "This will become a serious factor pushing the economic growth, as well as the growth of retail trade, which will grow by 7.4%-8% a year," he said. In line with Mr. Gref's forecast, foreign investments in 2005-2007 will grow by $12-16 billion a year. Mr. Gref also forecasts reduction of the raw materials sector's contribution to the GDP within the specified terms. "In the Russian economy now, 27% of the GDP is contributed by the oil and gas sector, however, by 2007, the contribution will slow down to 22-23% against a background of other growth sources' increase," said the minister. In his words, now all raw materials branches of the country, including metallurgy, give 70% of the GDP, "absorbing" 74% of investments. Mr. Gref also forecasts the development of hi-tech branches, which are ten times inferior to the indices of GDP contribution in developed countries. As for 2004, in Mr. Gref's words, even if the situation is favorable, Russian economic growth on the year results will not exceed 7.1%. In his words, the optimal forecast of GDP growth in 2004 is 6.9%, which is based on higher oil prices, on an intensive industrial rise, which "went up" after the investment demand rose, as well as on agricultural growth. In his opinion, a break in industrial growth, which is possible this year, cannot be ruled out. Besides, one should take into account possible negative consequences of the credibility gap in the banking system, believes Mr. Gref. He noted the growth of capital outflow this year and a weaker state demand. The economic development minister said the government considers three main scenarios of economic development. "The first is a pessimistic one, proceeding from the oil price at $23 per barrel with a possible decrease to $20 per barrel," German Gref said. In this case, the economic growth rates will reduce to 4-5% a year. "We think the third variant to be a basic one, proceeding from the price at $28 per barrel," said the minister. In his opinion, in case this price is preserved or further increases, the GDP growth in 2004-2007 is expected at 28.4%. The second variant is a conservative one; it is an intermediate between the first and the third ones. At the same time, noted German Gref, even if relatively high prices for oil are preserved, the Russian economy is in for problems unless deep institutional transformations are made, as well as if export pipelines and access to the raw materials base are restricted. In Mr. Gref's words, the number of poor people in Russia by 2007 will total some 10.5% of the country's population. Economic growth will make it possible to increase per capita incomes in Russia to $3,900 in 2007 from $2,540 in 2004, said the minister. Mr. Gref believes that soon Russia will become a world leader in timber production. "In case of adoption of the Forest Code, transparent and reasonable, Russia, which possesses 25% of forest resources, may turn into the world workshop on timber production," said the minister. From 2005, the strengthening of the ruble will be within the 3-4% range, said the minister. "This is considerably lower than in 2004, when we expect the ruble strengthening by 7%," Mr. Gref said. Productivity of labor, by the economic development ministry's forecasts, will grow by 6% a year and will outstrip the rates of the ruble strengthening twofold. The economic development and trade ministry revised the forecast of oil prices this year, increasing it to $31.2 per barrel of the Urals oil. The 2005 budget was calculated proceeding from the forecast of inflation next year at 8.5%, said Mr. Gref. He specified that his ministry forecasts inflation in 2005 at 8-9%. This is different from the Central Bank forecast, which plans inflation at 6.5-8%, stated the minister. "We agreed to make the corridors closer. The basic forecast is 8.5%," said Mr. Gref. Tariffs on services of natural monopolies, except for gas, will be within the inflation limits, he said. In his words, the growth of tariffs on gas will reduce from 23% in 2005 to 11.8% in 2007; electric energy tariff increase in 2005 will total 9.5%, and 7.5-6% in 2007. It's necessary to change the leaders of the growth of the Russian economy, which is now based on the raw materials sector; it's necessary to create an innovation system to attract investments in the Russian economy, said Mr. Gref. At the same time, the minister believes it necessary to further develop the raw materials sector on the basis of removal of restrictions on the access to the pipelines and the raw materials base. Mr. Gref believes that exportation of machines is to increase by 2007 by 11.6% to reach $20-22 billion. He noted that this year, the share of machines and equipment in the export structure continued to reduce. Should overall exports on year results grow by 12%, the exports of machines and equipment will increase only by 8%. In the minister's opinion, to overcome this structural misbalance, a system to support exports should be developed and procedures related to the return of the VAT and customs administration should be simplified.
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