Finance Ministry ups inflation forecast for 2005

MOSCOW, July 25 (RIA Novosti) - The Russian economy's monopolized structure is again lending its self to inflation growth in the country, the daily business newspaper Biznes reported.

For the third time this year, the Finance Ministry has raised the inflation forecast. Initially, it put the inflation rate for the year at 8.5%, but raised the outlook to 10% in spring and, now, to 11%. Many analysts say that inflation could reach 15%, meaning the rate could go under review again.

For the fifth consecutive year, Russia has had a surplus budget, with the Stabilization Fund increasing faster than planned and sufficient investment. The economy is growing, though not as fast as the Kremlin would like it to. GDP is expected to grow by 20% within three years. But the inflation rate, which was to be cut to below 10%, is seriously worrying the government.

The bulk of the guilt in the inflation climb rests with taxes on natural monopolies like energy, gas and railway companies and rising fuel prices. Though coordinated with the government, these tariffs continue to spur inflation.

The situation with fuel providers is even more complicated. Oil companies cannot officially be termed as monopolies, but petroleum prices are pointing to cartel collusion.

The government made its choice when it postponed monopoly reform, setting the economy up for more inflation problems.

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