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OECD predicts slower growth for Russia

A report by the Organization of Economic Cooperation and Development published on May 24 says that the world economy is not in for a decline. Despite certain risks, it is growing faster than in the past. Russia does not have to worry much, either.

The OECD predicts that it will develop more slowly, but still faster than many other countries, and the growth of prices will be much less significant. Russia is not a member of the OECD, which unites 30 countries recognizing the principles of representative democracy and free market economy. Russia were invited to start official talks on the OECD entry only in the middle of May this year. Nonetheless, the report spotlights Russia and three other participants in the self-proclaimed BRIC (Brazil, India and China). True, the authors of the report only briefly mentioned Russia's GDP dynamics, budget deficit, balance of payments and prospects of reducing inflation, and devoted two paragraphs to the analysis. They believe in 2007 Russia's GDP will stand at 6.5%, which is the same as in the two previous years. But in 2008, the economic growth will slow down to 5.8%.

The inflation, which will slow down to 6.5% for objective reasons by 2008, is making its own contribution to economic stability. The authors of the report believe that the main reasons for this decrease will be a reduction in the foreign trade surplus from 9.8% in 2006 to 3.8% in 2008; continued de-dollarization and a slower increase in prices on the services of natural monopolies. Indeed, rapidly growing imports are capable of neutralizing part of the money that Russia is receiving in enormous quantities from energy exports. At the same time, the alleviation of the budget policy will complicate the efforts to curb inflation in mid-term perspective, the report concludes.

According to the OECD forecast for economic growth rates, in 2007 the European countries (2.7%) will leave behind the US (2.1%) and Japan (2.4%). But by 2008 the status quo will be restored. The American economy will speed up to 2.5%, and Europe and Japan will slow down to 2.3% and 2.1%, respectively. The authors of the report have pointed to the high risks of global inflation. They recommend that their members should increase base rates in order to fight inflation. The US should not reduce them at least before the year expires. One of the main recommendations to Beijing is to prevent the Chinese economy from overheating by gradually increasing the yuan exchange rate. (