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Russia sees '04 5 pct GDP growth, budget in surplus

MOSCOW, June 5 (Reuters) - Russia's government approved budget guidelines for the next three years on Thursday aiming to speed up economic growth while restraining inflation.

"Next year we hope to succeed in raising the tempo of economic growth to five percent, from 4.5 percent forecast for this year, and to reduce inflation to 10 percent," Prime Minister Mikhail Kasyanov told a cabinet meeting.

"This will be a serious achievement."

The three-year guidelines have pencilled in a further spurt in growth in 2005-6 with the economy forecast to expand by 5.9 percent and 6.0 percent respectively in each of those years.

President Vladimir Putin's cabinet has drawn up broad economic guidelines intending to make framing annual budgets more easy to predict over the next three years.

Many private economists believe Russia can grow by up to six percent this year but the government has been more cautious in its forecasts.

Next year's budget bill has to go before the State Duma lower house of parliament by August 1.

Putin said in his annual 'state of the nation' speech last month that Russia needed to double the size of the economy over the next decade to have a chance of narrowing the gap with western countries.

"If we succeed in reducing inflation, this will help speed up economic growth," Kasyanov said, adding "a reduction in the tax burden will have an impact on the economy."

Under the plan, 2004 budget spending would be set at 2.591 trillion roubles ($84.26 billion) or 17.1 percent of GDP and revenues at 2.686 trillion roubles or 17.7 percent, leaving a 95 billion rouble budget surplus, equivalent to 0.6 percent of GDP.

"The budget is being designed to take into account a new tax system, maintaining all our priorities without increasing spending but still remaining socially oriented," Finance Minister Alexei Kudrin told reporters after the cabinet meeting.

The ministry is basing revenue plans on expectations of an average annual oil price of $22-23 per barrel of Urals crude oil, Russia's main export, over the three years.

However, the ministry says Russia can run a balanced budget between 2004 and 2006 using an annual average Urals crude oil price of $20 a barrel as a basis for spending plans.

The government is planning next year to abolish a sales tax and to reduce Value Added Tax (VAT) to 18 percent from a current rate of 20 percent.

The government has not yet been able to win backing in the Duma for tax reform with many deputies opposing abolition of the sales tax, a source of revenue for regional administrations, and favouring a bigger cut in VAT to 16-17 percent.

"I am absolutely confident that the government's proposals regarding the tax package will be accepted (by the Duma)," Kudrin added. ($1-30.75 Rouble)

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