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No shocks are in store for the Russian economy in 2005
No shocks are in store for the Russian economy in 2005. This is according to analysts who took part in a panel discussion at Moscow's School of Economics Wednesday. They reviewed the national economy's performance last year and assessed its outlook for the year ahead. One of the panelists, Yevgeni Gavrilenko, said that no severe economic upheavals were likely to befall Russia in 2005, but that the country would have to dramatically improve its investment climate in order to restore the confidence of foreign and domestic investors alike. Economic pundits predict further decrease in Russian exports and faster appreciation of the national currency in 2005. They expect the rate of economic growth to go down one percent year-on-year. GDP and inflation forecasts are somewhat harder for the analysts to make; the pace of GDP growth will depend largely on oil price fluctuations at the world's commodity markets, they say. As for the inflation rate, it is likely to stay somewhere within the 9%-to-15% range this year, says Andrei Belousov, head of Russia's Center of Macroeconomic Studies and Forecasts. The panelists were divided over the perceived crisis in relations between the country's political leadership and corporate executives. Some argued that the business community's confidence in the government was crucial for economic growth. Others brushed this off as an overstatement, saying that the business-state relationship's actual impact on the economic situation was not all that serious. Belousov, for instance, maintains that only a narrow circle of moguls has been affected by the government's policies while for entrepreneurs of smaller stature, it's business as usual. But there is a conflict between large and medium-sized businesses, as big business has "privatized" many of the country's institutions, including the courts, the analyst said. According to the panelists, there are lessons to be learned from failures in the first leg of the government's social security reform (this reform basically comes down to the replacement of welfare benefits with cash payments for pensioners, war veterans, and other economically disadvantaged population groups). These failures have highlighted the need for preliminary cost estimations and for coordination of implementation strategies with authorities on the ground. Yaroslav Kuzmenov, President of Moscow's School of Economics, said he was "terribly pleased we have burned our fingers" while trying to effect the welfare reform. He believes the government must keep that negative experience in mind as it launches education and healthcare reforms. These two sectors remain 50 to 60% underfunded, and transformations here are harder to bring about, noted Kuzmenkov
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