Zee Beam News

07.11.2006 MosNews – Russia’s economy will likely continue to grow at a healthy pace through 2007, but with growth running close to potential, more challenging times lie ahead, the International Monetary Fund said on Monday, Nov. 6. The IMF said demand pressures should remain strong in 2007, and could possibly intensify, allowing the economy to expand at around 6.5 percent this year and next. This is slightly higher than 6.4 percent growth in 2005. It said inflation had picked up and is likely to exceed the official end-of-year target of 8.5 percent. “Domestic resource constraints are tightening, causing increased leakage through the balance of payments and accelerated ruble appreciation,” the IMF said in its annual review of the Russian economy, which was quoted by Reuters. The fund’s experts also said that consumption and investment growth are expected to remain strong, largely thanks to the oil sector. They pointed out that the rise in investment and employment levels has been limited. The fund said Russia should refrain from further fiscal relaxation, given the buoyancy of demand and still strong inflationary pressures. It said it was concerned with the slow pace of economic reforms and called for urgent action in the “inefficient and undercapitalized monopolies” as well as in public administration. The reforms should be carefully sequenced, the fund added, including in the socially sensitive areas of health, education and communal services. The fund also said it was worried by the Russian government’s increasing stake in the oil sector, which could impinge on its future performance. “The disappointing performance of the state-controlled gas sector during recent years, despite record high energy prices, was seen as a sobering reminder in this regard,” the IMF said.