GDP growth of the Russian Federation (RF) in 2007, according to the last estimations, totaled 7,8% against 7,4% in 2006, declared Aleksey Kudrin, Minister of Finance of RF, speaking at the forum "Russia", organized by Troika Dialog in Moscow.

According to him, such results allow saying that in the nearest three years the economy of Russia grows 6,5-7% r ates

a year.

"According to the recent calculations, last year the economy grew by 7,8%. It is more than in 2006, when growth totaled 7,4%. Such rates allow us saying that in the nearest three years the economy grows not at the level of 6%, how it was expected before, but at the level of 6,5-7%", he said. Kudrin marked that it "discords" with the situation in the world economy and "irrespective of a possible recession in the world allows to have steady high rates of the economy growth". According to him, it goes about stability of political institutes and macroeconomics in Russia, and also about high expectations from the investors' part.

"This new quality of the Russian economy allows passing from short-term investments into long-term investments", the head of

the Ministry of Finance underlined.

According to Kudrin, within the nearest eight years "we can make the Russian economy innovative, able to enter the world markets with high-technology products". Recipe of that success, according to the minister, becomes liberalization

of the economy and introduction of mechanisms, promoting competitiveness of

the Russian companies.

Russian GDP (Gross Domestic Product) growth totaled 7,6% in

the 3Q of 2007.

These data, published by Rosstat (Federal State Statistics Service), turned out to be much better than prior estimations by MEDT (Ministry of Economic Development and Trade) and analysts’ predictions. According to them, the problems in the world markets influenced the Russian economy less, than it had been supposed earlier.

However, it would be possible to keep growth (provided by a rise of manufacturing industries, trade and construction) at a reached level not so long. The growth outsiders remain raw branches, education and public health services.

According to the figures it turned out that in comparison with the relevant period of the last year real GDP has increased by 7,6% and nominal GDP has increased by 22,1%. This is quite higher than MEDT estimation. GDP growth was estimated at 6,7% earlier in July – September, 2007. GDP growth rate totaled 7,9 % in the 1Q of 2007. In the 2Q it totaled 7,8% and in the 2006 year it totaled 6,7%.

Actual excess of Rosstat estimation over MEDT prediction made up 0,9%. If in the 4Q of 2007 economic growth didn’t stop than all the analysts and MEDT predictions for the whole 2007 (7,3-7,4 %) would be exceeded. According to the year results, GDP growth rate can reach 7,7-7,8 %. In this case in 2008 GDP dynamics will be the best since post-crisis 2000.

Then GDP has increased by 10%, and it was explaine d by the economy recovery after the crisis of 1998.

The analysts didn’t expect such high indices. “It is a surprise, but unambiguously a positive one”, declared Jaroslav Lisovolik from Deutsche Bank. “I would not expect economy recession in the end of the year, taking into consideration high October indices in investments

and commercial production”. Really, according to Rosstat, in October, 2007 in comparison with the similar period of 2006 the investments increased by 19,6%, and commercial production increased by 6,1%. “These facts mean that the problems in the world markets have influenced the Russian economy less than it has been expected”, he marks.

The other banks analysts, interviewed by the Interfax agency, are surprised in a pleasant way too.

Anton Struchenevsky from Troika Dialog predicts now GDP by 7,8% during 2007. His prediction was 7,5% two days before the Rosstat estimation publication.

Tatyana Orlova from ING Russia told that the bank economists predictions still remain 7,7 %. Natalia Orlova from  Alfa-bank noted that the bank prediction is 7,4%, but “according to the new facts it is quite conservative”, now she waits GDP growth by 7,5-7,6% when the year will be up.

The analysts point out that industrial growth is the reason of the things happening.

Natalia Orlova marks “acceleration growth of the gross value added in manufacturing branches”. In the 3Q of 2007 it was 7%, that’s closer to the top border of this index fluctuations range for the last four years (2,3-11,8%). However, the value added in trade and financial activity grew much quicker, that’s 11,4% and 11,6% accordingly. But really high growth rates are shown by construction. The value added has increased by 21,3% there. Let’s note, in September MEDT did not exclude a certain index growth delay in construction, but the autumn indices practically didn’t show the growth rates decrease in construction, in spite of sudden price rise on building materials.

Heterogeneity of industrial growth is emphasized not only by the leader branches dynamics. There are also outsiders. First of all, it is mining operations where it is only 0,8%. Besides, agriculture grows badly (0,9%). However, one can expect growth dynamics improvements because of the world and intra-Russian price conjuncture improvement even by the end of 2007. The branches, being an actual state monopoly, have really bad growth rates.

They are education (1,1%) and public health services (1,9%).

Mining operations dynamics is easy to explain. Many oil deposits are almost exhausted.

It is almost impossible to increase production there without significant investments. And taxation growth of raw branches imposed by the government in the beginning of 2000th years under the slogan “economy diversification” and “leaving the raw dependence” gives the results. Low dynamics of the branches corresponding to the same national projects can not arouse any questions. The state investments into education and especially in public health services were not so great comparing to the whole economy, but very huge comparing to themselves in 2006-2007 years. Jaroslav Lisovolik considers that unlike construction (where increased investments have caused an immediate growth acceleration of value added) one can hardly wait for changes in agriculture and social sphere without a good time period. “Some time should pass in order the effect from investments into national projects will be considerable”, the economist marks.

Education and public health services’ shares in Russian GDP are not big, only 2,3% and 2,6% accordingly yet. They have almost been the same for the last several years. However, there are no considerable changes in the GDP structure for the last years, unless agriculture share (it has a little bit decreased) and construction, manufacturing branches and financial branches’ shares have increased. It is obvious that such growth can not be eternal. It is also necessary to apply reforms of the most conservative economy branches for GDP growth continuation on the level reached in 2007.

Still very often such economy branches are not considered to be conservative ones in Russia and sometimes the government is inclined to reform with a big, too evident, caution.

Public health services and education are at the beginning of this list.

So, these reforms remain in the agenda.

The growth of GDP for nine months of 2007 made 7,4% against 6,3% during the same period of 2006.

Such numbers announced Elvira Nabiullina, the head of the Ministry

of Economic Development. According to her, over the last years the Russian economy has overheated – annual economic growth makes 6-7% that considerably outstrips the dynamics of world economy. And if to recount GDP according to the rate of dollar exchange, GDP already made $985 billions in 2006 as compared to $260 billions in 2000.

This year, Nabiullina is sure, Russia will cross the limit of one trillion 200 billions dollars by GDP volume.

Interestingly, it is marked in the Ministry, that the GDP volume has exceeded the level of 1991, and it is already quite another GDP by structure, created in the market economy. And if in 2003 GDP made about $3 000 per capita at the current rate, in 2006 it was already $7 000 and about $12 000 at parity of buying power.

From the report of the head of the Ministry of Economic Development it follows also, that not only GDP has pleased with the progress, but the stock market demonstrates impressive results.

So, capitalization of the Russian market of shares from 2000 to 2006 increased more than 12 times, having evened in 2006 with the annual volume of GDP.

This index grew more than 3 times for one and a half year.

Russia occupies the 18th place in the world on capitalization of the stock market and the 8th

place in Europe.

Considerably grow the IPO volumes of the Russian companies, the growth is 2,5 times more as compared to the first half of 2006.

Investments

So, apparently, everything is good in Russia. Therefore successes, under the document, noticed all, especially foreign investors. For the first half of

2007 the clear flow of foreign investments into Russia made more than $60 billions. It is 2,5 times more than in the first half of the last year.

Substantially – almost 1,5 times more – grew the flow of direct foreign investments, having made about $25 billions for the first half of this year.

“It is especially pleasant, that the Russian-American trade and economic relationships become better and better year after year”, marked the head of the Ministry of Economic Development, Elvira Nabiullina. So, in 2006 the volume of commodity turnover between Russia and the USA, according to the data of Russian statistics, has increased by 41% as compared to 2005 and made $15,3 billions. Today the USA occupies the 8th place among the trade partners of Russia by the volume of commodity turnover; about 3% of all commodity turnover of Russia falls on its stake. Moreover, the USA is among the leading countries-investors by the volume of attracted foreign investments in the economy of Russia. According to the results of 2006 the USA was on the 6th place by the volume of the cumulative foreign investments in Russia. Thus, unlike other most countries, in the structure of incoming investments from the USA prevail direct investments (about 60%).

From these indices of the Ministry of Economic Development is clear that there exists an enormous potential for extension of bilateral cooperation between Russia and the USA. But nevertheless the Ministry is disturbed, that investment potential of the Russian market is used by the American companies far not to the full extent. One of the deterrent, in opinion of the Ministry of Economic Development, is the absence of bilateral agreement about defense and encouragement of capital investments.

The USA is the one of large economies, with which Russia doesn’t have such an agreement.

To the end of the year the government will consider the Conception of long-term socio-economic development of Russian Federation to 2020. In December at the government session will be considered a summary report about results and basic directions of governmental activity for 2008-2010.

As before, from the data of the Ministry of Economic Development, the government preserves an absolute orientation towards market transformations. As it is marked in the Ministry, there cetainly won’t be such major reforms, that were carried out in the 1990th and at the beginning of 2000th.

The most significant problems, requiring serious institutional transformations, in opinion of the Ministry, will be concentrated foremost in the sphere of efficiency of state administration and regulation, and also in the sphere of social policy.

Creation of clear and transparent mechanisms of the government

and business cooperation, effective mechanisms of the government provision of services, transparent mechanism of government procurement, distinct administrative regulations are all major institutes, determining ultimately favourable environment for business activity. Also important is transparent and clear mechanism of investing of private capital, including foreign one, into the strategic sectors of the Russian economy.