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Economic Development and Trade Minister German Gref on current macroeconomic indicators:

German Gref: We have calculated the results of our economic growth for July and for the first seven months of 2007. GDP growth in July amounted to 8 percent and from January to July it was 7,9 percent. The Industrial Production index is as follows: industry grew at 7,8 percent in July and at 7,7 percent in the first seven months of 2007. Along with this the manufacturing industry – contained within the Industrial Production index – grew at 12,5 percent in July. And the extraction of mineral resources grew by only 1,5 percent. In other words, the manufacturing industry is now acting as the instigator and main force behind economic growth in industry.

Vladimir Putin: Aleksei Leonidovich and I looked at the figures. We are still lagging behind in the machine building industry.

Aleksei Kudrin: With respect to investments in all industries.

Vladimir Putin: Significantly lagging behind.

German Gref: The machine building industry is growing well, the amounts of investment…

Vladimir Putin: I see. At some point these indicators will be in opposition and this will limit growth. And for that reason we – and first and foremost I am referring to the Economic Development and Trade Ministry – already need to start thinking about how to prevent this. I think you would agree with me.

German Gref: Yes of course.

Vladimir Putin: Please go ahead.

German Gref: In July agriculture grew by 3,2 percent and trade by 14,7 percent – the best indicator for 2007. And investments in fixed assets grew by 24,7 percent in July and by 22,7 percent over the first seven months of this year; this is the most dynamic indicator for 2007. As a point of comparison investments grew by 8,8 percent in July 2006 and by 10,6 percent over the first seven months of that year. In other words, this year’s July growth was four times more than last year’s July growth and over twice as much as the investment growth in the first seven months of last year. Real income increased by 15,5 percent in July and by 11,9 percent over the past seven months. Average wages grew by 15,4 percent in July and by 17,1 percent over seven months. This is also a very high rate. Over the first seven months of 2006 Russian salaries grew by 12,5 percent. In other words we are five percentage points ahead of last year’s indicators. Along with this the macroeconomic indicators are, for the most part, stable. The monetary mass is growing a little bit faster than it did last year – by 2,5 percent – and in general this is reflected in inflation. Among all the macroeconomic indicators inflation remains the most sensitive one, but we can nevertheless observe that over the first two weeks of August inflation in Russia amounted to 0,2 percent and that prices in the produce market are steadily declining. We think that August will be quite a good month in this respect. We are planning to have about 0 percent inflation in the last two weeks of August. Therefore we think that we will be able to keep to the forecasted figure, namely 8 percent.

We have more than 400 billion dollars in gold and currency reserves. In the past seven months our gold and currency reserves grew by 112,5 billion dollars.

Vladimir Putin: And the total amount is?...

German Gref: The total was 416 billion on July 1, 2007 and is now 420 billion.

All other indicators are generally positive. There were fluctuations in the stock market and there still is a certain tension in the stock market and this is connected with the macroeconomic situation that first occurred in the U.S. and then affected the Asian market. We have good expectations for the measures implemented by the United States Federal Reserve and the European Central Bank (and the Russian bank worked quite well with us last week). I think that these temporary fluctuations should not have any significant long-term ramifications on the market. We hope that in the near future the market will begin to grow and grow at a stable rate, and that at least by the end of the year we will be able to reinstate the level from which we started to fall and even surpass it.

Vladimir Putin: First and foremost, there already are positive signals from the west and, secondly, this was not an extreme drop for us. In light of the previous unprecedented growth we can refer to what happened as a correction. Therefore I agree with you and consider that these views are absolutely well-founded and correct.

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