Finance Minister voices inflation fears

Inflation could be higher than planned in 2009, Russian Finance Minister Alexei Kudrin told State Duma deputies today.

There is a risk that inflation may rise above 13 percent, he said, without elaborating.

Turning to other economic forecasts for 2009, Kudrin said GDP growth would be close to zero, while the Economy Ministry earlier spoke of a 2 percent growth.

“We must be prepared for further economic decline and a conservative tax and budget policy. Yet we will implement our main programs involving the social protection of the population. The reserves we have built up allow us to be up to that task,” Kudrin stressed. According to the latest forecasts, he noted, the global economy would be growing at the lowest rate since World War II. “A decline of more than 2 percent is expected in the United States, while the Eurozone economy will be down 1-2 percent, and China will face a drop of 6 percent. In Russia, economic growth will be close to zero,” he reported.

Capital flight is projected to be between $100 billion and $110 billion, while budget revenue will be far below the planned RUB 10.9 billion (approx. $307.9bn). Kudrin puts it at RUB 6.5 trillion (approx. $183.6bn), with oil exports to generate the bulk of the revenue. “But it won’t be just oil. We have passed a large package of anti-crisis measures, including tax cuts, higher depreciation charges, and lower oil export duties. Tax cuts could total RUB 900 billion to RUB 1 trillion (approx. $26bn to $29bn) in 2009. We are planning to continue our support for various sectors of the economy, including manufacturing, small businesses, defense and others,” he concluded.

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