RUSSIA - Jan. 1 - Utility Curbs Slow Inflation.

The IHT quotes the report by the State Statistics Committee as saying inflation in the country slowed to 15.1% in 2002, the lowest rate in five years, as the government limited price increases for natural gas and electricity. Consumer prices rose 1.5% in December, driven by food and services, which were also main contributors to annual inflation. The annual inflation rate missed the government's target by 1.1 percentage points, an improvement over 2001, when the rate of 18.6% was one-third higher than the goal. The Central Bank again printed roubles to buy dollars earned from oil exports as the price of Urals blend crude rose 56%. Christopher Weafer, a strategist at Alfa Bank, the country's largest privately held bank, said: "High oil revenues are a double-edged sword for Russia. They bring much-needed cash into the economy while at the same time making the government's fight to keep inflation low much harder". The government limited increases in utility prices to help combat inflation. Unified Energy System RAO, the national power monopoly, was allowed to raise electricity prices about 22%, or half of what the utility requested. Gazprom OAO was permitted to raise domestic natural gas prices by 25% after seeking a 37.5% increase. Inflation reached 2,000% in 1992, when price controls were removed on most goods, and 84.4% in 1998, when it let the rouble's value float and it defaulted on $40 bn of debt. While inflation slightly exceeded 15% in 2002, the rouble declined 4.2% against the dollar, eroding the price advantage that domestic producers had over importers. Weafer said: "The strength in the rouble and high inflation are hurting the competitiveness of Russian manufacturers, both in the domestic and export markets". The economy grew 4.1% in 2002, slowing for the second year, Economy Minister German Gref said. It expanded 5% in 2001 and 9% in 2000. The government has set the 2003 inflation target at 10-12%. Katya Malopheeva, an economist at Renaissance Capital, said: "Given the high oil prices, meeting the 12% forecast will be challenging".