Livshits Predicts High Inflation Into Year 2000

A top adviser to President Boris Yeltsin has outlined his vision for Russia in the year 2000, predicting slow growth, 40 percent annual inflation and three industrial powerhouses leading the economic way.Alexander Livshits, appointed three months ago to head Yeltsin's economic team, said fuel and energy, aerospace and metallurgy would be Russia's stars in the years to come."The Russian economy is the most interesting economy in the world," he said."Forecasting the situation needs knowledge and a bit of cheek, but if I am to make a forecast, I would say that by 2000 we will see growth, but slow growth -- 2 or 3 percent."Inflation will not be less than 30 or 40 percent a year, the budget will still show a deficit, but there will not be major unemployment."Livshits came into the spotlight last month when he outlined six presidential decrees designed to restore order to an economy thrown into turmoil by 2 1/2 years of economic reform.Industrial output is 27 percent below 1993 levels, although inflation is down to below 10 percent a month from January's 22 percent.Prime Minister Viktor Chernomyrdin has said Russia is on a tightrope between inflation and plunging output.But Livshits, backed comments by other officials, said production figures ignored vast sectors of the economy. while admitting "a fall in production is certain."Inflation might already be too low, given Russia's special problems and industry's need for extra cash, he said. There would be no technical problems in bringing inflation down to 1 or 2 percent a month but Livshits said: "It would not be natural given the realities of the Russian economy."Noting that Russian firms were inefficient long before the Bolsheviks came to power in 1917, he said companies would continue to need cash injections to survive."It is not possible to change in two, three or five years something which has been going on for centuries," he said. "From that point of view I remain sure that annual inflation will still be 30 or 40 percent by 2000."Livshits' vision is of a Russia where fuel and energy, aerospace and metallurgy sectors invest heavily abroad."The Russian economy will have three strong sectors with powerful backing, created to international financial standards," he said. "These will be active as investors on international markets -- something which is already happening today."Livshits said Yeltsin's recent decrees aimed to support industry, liberalize trade and restore normality to a tax system riddled with contradictions and open to evasion.It was up to parliament to decide whether to agree to the lower profit and value added taxes ordered by Yeltsin. Livshits said lower tax income could be offset by big revenues from Russia's massive privatization campaign.The campaign enters its second stage next month when shares in state firms will be sold for cash rather than swapped for privatization vouchers distributed free to all Russians in 1992.Livshits said the sell-off could raise over 8 trillion rubles (more than $4 billion) this year. The government has said it expects revenues of 4 trillion rubles.