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Last Friday, Finance Minister Alexei Kudrin warned that inflation may reach 11% this year
Last Friday, Finance Minister Alexei Kudrin warned that inflation may reach 11% this year, but added that the government's goal is to reduce this figure to 4%-4.5% by 2008. The government initially estimated inflation would reach 8% in 2005 but later raised the forecast to 10%. During the first half of the year, inflation reached 7.9%. On the upside, Kudrin stated that GDP would grow 5.9% this year, marginally above the 5.8% quoted by the Finance Ministry recently. The minister also said the average oil price is expected to reach $48/bbl next year and $40/bbl in 2006. Recent statistics released by the government have indicated a certain degree of growth acceleration. The higher than initially forecasted oil price is a contributing factor (initially, the government assumed an average oil price of $30/bbl for this year). A high oil price benefits the service sector through increased liquidity from high capital inflow. A high oil price should also benefit fixed capital investment. Government statistics appear to confirm this trend. On the downside, it is the high oil price that adds to inflationary pressure. This is also one of the reasons why Kudrin said Friday that the government would not increase gas tariffs more than 11% next year. Gazprom has called for at least a 22% increase
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