Cabinet Forecasts Gradual Decrease in Inflation Next Year

The Russian government has forecasted a gradual decrease in inflation throughout 2003-2005, says a report called 'The forecast of the social and economic development of the Russian Federation in 2003 and the basic parameters throughout 2005'. In particular, inflation is expected to reduce to 10-12 percent in 2003 and it will go down by 2 percent a year to 6-8 percent in 2004-2005.

To provide this inflation dynamic, prices on products and services of natural monopolies should not lead to a rise in consumer prices of more than 3-4 percent a year. In particular, for the year 2003, the government has set the maximum increase in prices for natural gas at no more than 20 percent. In 2004 to 2005, the Cabinet plans an increase in gas prices that will be no more than 1.14-1.15-fold more than inflation.

The corresponding limitations will be applied to prices for electricity. According to the report, the maximum possible rise in electricity prices was set at 14 percent, which would slightly surpass the expected inflation rate.

In the event the economic situation improves in Russia in 2004-2005, a rise in electricity prices may be more significant against inflation - by 1.05-1.08 times, as it will be necessary to create financial resources for upgrading aged equipment. In addition, a rise in prices for electricity will promote a reduction in the use of energy.

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