Zee Beam News

24.01.2006 MosNews - On Tuesday, Jan. 24, the head of Russia's Federal Statistics Service Vladimir Sokolin announced that the country's gross domestic product (GDP) grew by six percent in 2005. This is in line with forecasts made over the course of the year by various international agencies and government experts. As MosNews had reported, the original GDP growth forecast made by the Russian government for 2005 amounted to 6.5 percent. But in May 2005, Russian business daily Vedomosti reported that the government forecast had been cut from 6.5 percent to 5.8 percent. Slowing oil export volumes were to blame for the downgrade, meaning Russia was unable to capitalize on near-record international crude prices. "We cannot ignore these factors," Vedomosti quoted one ministry official as saying. Still, at about the same time the International Monetary Fund forecasted that Russia's GDP would grow by 6 percent. "We expect this year's increase roughly at six percent. Though it is much less than last year, the capital inflow will start reviving," Paul Tomsen, the IMF's senior resident representative in Moscow, was quoted as saying. Later, in September, the IMF changed its mind and downgraded GDP growth forecast for 2005 to 5.5 percent. "After a remarkable acceleration in 2003-2004, real GDP growth in the Commonwealth of Independent States (CIS) has slowed down noticeably in 2005. This has especially been the case in Russia, where policy uncertainty, the Yukos affair, and sharply higher marginal tax rates in the oil sector — to almost 90 percent at prices above $25 per barrel — have been key factors in sluggish investment and sharply lower output growth in the oil sector," the IMF report said. By October Russian officials were confident enough of their original forecasts. Russian Finance Minister Alexei Kudrin spoke at an investment conference and said: "We are mastering up the 6 percent growth plank with confidence. This means that all of the main positive tendencies in our economy remain." The final result did not exceed the six percent mark, and was much lower than the 7.4 percent growth registered in 2004, but Russian authorities still have cause to rejoice, because at the beginning of the year it appeared the Yukos affair would have a much more negative effect on the economy. The head of the Federal Statistics Service also said that inflation during the same period was 10.9 percent, the lowest rate in the past seven years. Russia's economy in recent years has rebounded significantly from the economic collapse of 1998 and Sokolin said the latest figures show "the positive trend of social-economic processes continued." He said average incomes rose 8.3 percent in real terms in 2005.