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CIS Feels the Impact of Higher Russian Gas Prices
Within the CIS, Russia is among the top three countries for rising inflation and among the bottom three for rising GDP. If inflation is not reeled in by the end of the year, Russia will not be likely to keep up with the other countries' rate of economic growth. The highest inflation between January and September 2006 was recorded in Moldova (12.2 percent), the CIS Interstate Statistics Committee reported yesterday. It was followed by Tajikistan (10.8 percent) and Russia (9.9 percent). Oil-producing Kazakhstan and Azerbaijan has lower inflation at 8.7 and 7.3 percent, respectively. One of the lowest rates of inflation, 5.9 percent, was found in Ukraine.
The situation may change by the end of the year. Because of falling oil prices, the influx of capital into Russia is declining ad gas prices have stopped rising. As a result, inflation between January and October amounted to 7.5 percent, and many analysts are inclined to think that inflation may remain within the 9-percent limit set by the government.
In the meantime, the price hike for Russian natural gas at the beginning of this year is starting to be felt in the economies of the CIS countries. At the beginning of the week, the Ukrainian State Statistics Committee reported that inflation had jumped by 8.7 percent between January and October. “Prices for natural gas for utilities companies were raised long ago, Troika Dialog analyst Irina Piontkovskaya explained. “But, since utilities fees are set by region in Ukraine, authorities in several regions did not raise prices for the public until the beginning of the heating season.” Those price increases boosted inflation in a number of regions. And that is not the end of it. In Kiev, which accounts for a significant portion of the Ukrainian economy, step price hikes are planned for December. Piontkovskaya estimates that inflation may reach 11.5-12 percent by the end of the year as a result.
The IMF is predicting that the highest inflation for the year in the CIS (19.3 percent) will be recorded in Uzbekistan. Georgia's strict fiscal and monetary policies will allow it to hold inflation to 10 percent. That can be considered a good showing, considering that experts at ING Bank predicted that inflation in Georgia would reach 11 percent, due largely to the price increase for Russian gas. Moldova will also end the year with bad indicators (11.5 percent).
Unfortunately, the higher natural gas prices do more harm to Russia's neighbors than they do good for Russia. According to the CIS Interstate Statistics Committee, Russia was third to the last for GDP growth between January and September with 5.7 percent. Behind it were only Moldova (5 percent) and Kyrgyzstan (3.2 percent). By yearend, Russia will be able to pass only Ukraine by reaching 6.5-6.6 percent, compared to its 6-6.5 percent.
All the Article in Russian as of Nov. 09, 2006
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