| The President ordered German Gref to meet the 10% target The rate of inflation, which exceeded all possible limits, despite the efforts of the monetary authorities, worried the head of state. At a meeting on Friday with Minister of Economic Development and Trade German Gref, the president found out what the prospects are for maintaining the price growth parameters planned by the government. As you know, the government initially planned inflation for 2005 at 8.5%, and then raised its forecast to 10%.
The minister carefully convinced the president that there was still a chance to keep price growth within 10% in 2005. But, unfortunately, Vladimir Putin did not ask, at least in front of journalists, the most intriguing question - through what measures the government expects to curb inflation.
The president was prompted by the sad thoughts that there was no longer any chance of meeting the 10% planned budget target by a report from the International Monetary Fund. According to foreign experts, inflation in Russia at the end of the year will be 11-11.5%. By the way, this is far from the most pessimistic forecast. There are experts, for example, scientific director of the Higher School of Economics Evgeny Yasin, who believe that inflation this year could reach 13 or even 15%.
“Do you know the IMF forecast?” - Vladimir Putin asked the minister. German Gref, of course, was aware of such forecasts, but the minister chose to answer in a cautiously optimistic manner. “With a coordinated policy from the monetary authorities, the government will be able to stay within 10%... Well, maybe a little higher.”
The President immediately made it clear that the Cabinet of Ministers should still meet the deadline. “If the government has set goals, we must strive to fulfill them. Let’s not return to this again,” concluded Vladimir Putin.
However, the figures that Mr. Gref announced at the meeting with the president do not in any way support this optimistic version. In the first three months of 2005 alone, the inflation rate was already 6.5%. This figure is almost one and a half times higher than last year, when annual inflation ultimately amounted to 11.7%. In addition, we must not forget that the main surge in inflation occurs in the last months of the year.
However, in May, price growth stopped. According to the results of 16 days of this month, Mr. Gref reported to the president, the inflation growth rate was only 0.3%. “We forecast to reach 0.6% in May,” the minister pleased, “this is the first month when inflation rates are lower than last year.”
There is more relatively good news: industrial production, which has grown by less than a tenth of a percent per month this year, posted a full half a percent increase in April.
According to Mr. Gref, such high inflation rates are mainly associated with two factors - an increase in housing and communal services tariffs and an increase in prices for manufactured goods, which amounted to 7% in the first quarter. But besides this, there is also an increase in prices for gasoline and agricultural products. The White House has absolutely no control over all this. If at the federal level tariffs are revised once a year, then at the regional level they grow almost uncontrollably. The government cannot fight rising prices for goods.
The only measure that the Russian government actively uses is sterilization of the money supply through the Stabilization Fund. However, it cannot be said that it gives great results. In addition, the IMF, and all foreign experts unanimously declare that the Russian government sets itself two mutually exclusive goals: suppressing inflation and combating excessive strengthening of the ruble exchange rate. However, the Russian authorities are not yet ready to abandon one of them for the other. Vera SITNINA |
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