MOSCOW, October 24 (RIA Novosti) - Russia's deputy prime minister cited economic indicators Tuesday which show a better than expected performance in some branches of the Russian economy.
Alexander Zhukov said the government expects annual GDP growth of 6.7-6.8% this year, adding that the indicator appeared better than expected in the first nine months of the year, forecast at a 6% rate at the start of 2006.
"The economy has started growing after a quiet period, and we expect the economy to grow by 6.7-6.8% in 2006," Zhukov said.
Finance Minister Alexei Kudrin said in late September the country's GDP has been growing at an average rate of 6.5% since 2003, just shy of the 7% needed to accomplish the objective President Vladimir Putin set that year of doubling GDP within a decade.
Zhukov said the share of fuel and energy products - the main source of Russia's budget revenues - in GDP was declining in comparison with previous years. "It means that this year's growth rates are mainly based on growing domestic consumer demand," he said.
Zhukov also said the government is likely to meet its inflation target of 9% for this year.
"It will be the first year when inflation will be lower than 10%, and we hope it will be 9%," Zhukov said.
Inflation was 7.4% as of October 16, and there is still some margin to meet that target. In 2008, the government plans to reduce inflation further, to 4.5-6%.
Highlighting other encouraging economic indicators, Zhukov said Russia's foreign debt will be gradually reduced to $40 billion over the next three years.
In August, Russia fully repaid its $23.7 billion debt to the 19-nation Paris Club, which unites Europe's largest economies, ahead of schedule.
The country's remaining debt, as assessed by the Finance Ministry as of July 1, 2006, stands at $72.9 billion. Russia is paying off its foreign debt mainly from its Stabilization Fund, set up to accrue windfall revenues from high world oil prices.
Zhukov said the fund will soon total $80 billion and will continue to increase over the coming years, to exceed $149 billion in late 2007 and about $260.4 billion by the end of 2009.
"The Stabilization Fund is already nearing $80 billion and will continue to increase as budget revenues considerably exceed expenses," he said.
The Finance Ministry invested part of the Fund's money in foreign exchange in October, and is considering other investment options in a bid to protect future generations from a possible drop in oil prices.
The deputy prime minister also pointed to a considerable increase in foreign investment into the country, which reached around $25 billion this year.
"This year, we are for the first time witnessing a major capital inflow into Russia. The inflow of private capital has reached around $25 billion as of today. This exceeds capital flight figures," he said, adding that most of the capital is in the form of direct foreign investments.
Economic Development and Trade Minister German Gref said Monday that investment in Russia rose 11.7% in the first nine months of 2006, and 15% in September. According to the Finance Ministry, foreign and domestic capital investment in Russia in 2005 totaled $121 billion.
According to the global management firm AT Kearney, Russia rose to sixth place in the FDI (Foreign Direct Investment) Confidence Index 2005, after China, the United States, Britain, India and Poland.
But foreign analysts said a recent crackdown on foreign companies developing vast hydrocarbon deposits off Russia's Pacific coast over alleged environmental violations and overstated spending, and Russian energy giant Gazprom's surprise move to bar foreign investors from a gas project in the Barents Sea, have raised questions about the country's investment appeal.
