April 15, 2007	Sunday	Rabi-ul-Awwal 26, 1428

WASHINGTON, April 14: The Russian rouble is likely to appreciate further in 2007, a trend that the economy must adjust to, Deputy Finance Minister Sergei Storchak told Reuters on Saturday.

Storchak, in Washington to attend the spring meetings of the International Monetary Fund and World Bank, also said that inflation was likely to come in below targeted levels and lower than last year’s 9 per cent.

“There are no signs the rouble will stop its appreciation anytime soon. We will just have to accommodate ourselves to this,” he said in an interview. “There are signs companies are increasingly relying on rouble contracts now.” He refused to say what kind of exchange rate the finance ministry is expecting by year-end.

The rouble appreciated about 4 per cent last year against the currency basket used by the central bank while in real effective terms it firmed some 7.6 per cent, driven by booming oil and commodity exports and huge capital inflows from foreigners keen for a slice of the growing economy.

The currency is now trading at 25.794 per dollar versus 26.34 at the end of last year.

The firmer rouble allowed Russia to cut inflation to single digits for the first time since the demise of the Soviet Union but some government officials and businesses have complained the appreciation is hurting competitiveness.

Industrial output grew just 3.7 per cent last year and Storchak said he does not expect acceleration in 2007. Gross domestic product growth is also forecast to slow slightly from last year’s 6.7pc, as prices for oil, the country’s main export, have eased from last year’s record high levels.

“We are working under the scenario that 6.3-6.5 per cent (GDP growth) will be achieved. External factors are in our favour and domestic demand is also strengthening,” he added.

However there could be good news on the inflation front, he said, forecasting the pace of price growth would slow further to 7.1-7.2pc this year. The official target is 8pc but recent data was encouraging, showing first quarter consumer inflation at 3.4pc versus year-ago levels of 5 per cent.

The five-year long oil boom has helped Russia turn around its finances completely, going from a 1998 currency collapse and debt default to being a net creditor and having accumulated some $330 billion in reserves, the world’s third largest.—Reuters