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    Net capital inflow in Russia to hit $40 bln in Jan.-May - CBR -1

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    Net capital inflow in Russia hit $17 billion in April and is expected to reach about $40 billion in January-May, First Deputy Chairman of the Central Bank of Russia Alexei Ulyukayev said Sunday.

    *Recasts the lead, adds paragraphs 2-10)

    KAZAN, May 20 (RIA Novosti) - Net capital inflow in Russia hit $17 billion in April and is expected to reach about $40 billion in January-May, First Deputy Chairman of the Central Bank of Russia Alexei Ulyukayev said Sunday.

    Net capital inflow in Russia hit a record $42 billion in 2006 as Russian companies, believed to be heavily undercapitalized, held initial public offerings to raise funds for their development and compete successfully with western firms.

    Ulyukayev also said inflation in Russia was expected to be below 5.2% in the first half of 2007 compared with 6.2% in the same period last year.

    "In the first six months of 2007, inflation is expected to be more than one percentage point lower than in the same period last year," Ulyukayev told a business forum organized by the European Bank for Reconstruction and Development in the capital of the Volga republic of Tatarstan.

    The Russian government projects inflation at 7-8% in 2007 compared with 9% last year.

    The Central Bank of Russia guarantees the stability of the Russian banking system in the foreseeable future, Ulyukayev said.

    "We guarantee stability in the development of the Russian banking system and believe that investment risks are minimal," Ulyukayev said.

    Ulyukayev also said the Central Bank of Russia could further raise reserve requirements for credit institutions' liabilities to nonresidents and Russian citizens to ease inflationary pressure and curtail growth in money supply.

    On May 14, the Russian Central Bank decided to raise from July 1 the reserve requirements for credit institutions from the current 3.5% to 4-4.5%.

    Ulyukayev also said the ruble's appreciation against the dollar/euro basket will stay within the projected range of 4-5% in 2007.

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