by Xinhua writers Yu Maofeng, Zhao Jialin

    MOSCOW, June 20 (Xinhua) -- The economic downturn, which has exposed the deficiencies in Russia's economic structure, may well serve as an opportunity for the country to restructure its economic development model, analysts say.     

Russian President Dmitry Medvedev chairs a meeting of the Government Commission on Economic Modernization and Technological Development at "Kaspersky Laboratories" developing center in Moscow, June 18, 2009. (Xinhua/Reuters Photo) Photo Gallery>>>

    ANTI-CRISIS MEASURES

    Russia, the world's largest energy supplier, is sliding into its first recession in a decade as the global financial crisis dampens demand for oil and other commodities.

    The country's gross domestic product (GDP) shrank by 9.8 percent year-on-year in the first four months of this year. In the same period, industrial production tumbled 14.9 percent, foreign trade volume plunged 45.3 percent and investment slipped 15.8 percent.

    The Russian Economic Development Ministry has lowered its forecast for economic growth in 2009 from a 2.2 percent decline to a 6.6 percent contraction in view of the deteriorating economic indicators.

    Against the dismal economic backdrop, the Russian government has been seeking ways to move out of the shadows of the crisis.

    In an anti-crisis program adopted on Friday, the government pledges responsible macro-economic policy aimed at maintaining economic stability and creating incentives for the growth of the public's savings.

    The plan also calls for stronger investment in the economy and the formation of an entirely new model of economic growth.

    The government already spent 1.4 trillion rubles (46.7 billion U.S. dollars) from its oil funds to carry out anti-crisis measures.

    In a new federal budget for 2009 approved in April by the State Duma, the lower house of parliament, education, health care and pensions took priority, and 17.5 percent of expenditure was earmarked for the real economy.

    Meanwhile, Russia's central bank has cut interest rates three times in a row since April in an effort to channel funds into the real economic sectors, reducing the refinancing rate to 11.5 percent from 13 percent.

An aerial view of Russia's largest Sayano-Shushenskaya hydroelectric power station on the Yenisei River in the Siberian Khakassia region, about 520 km (323 miles) south from the city of Krasnoyarsk, June 19, 2009. (Xinhua/Reuters Photo) Photo Gallery>>>

    

    INNOVATIVE ECONOMY

    The economic crisis has indicated Russia's heavy dependence on energy exports and overseas borrowing. The "petro-dollar," which has played a positive role in stabilizing financial market and safeguarding people's welfare, failed to fuel an economic recovery.

    Productivity in Russia is one-fourth the level in the United States and the output of innovative industries accounts for about 5 percent of the total economic output.

    Jim O'Neill, chief economist of Goldman Sachs, said Russia relies excessively on the energy industry and needs to conduct in-depth reform so as to improve its economic prospect.

    Russian economist Lev Freinkman, in an interview with Xinhua, said the international financial crisis will speed up the government's efforts to optimize its economic structure.

    The federal budget for 2009 has been slashed, but expenditure on such high-tech sectors as space and nuclear industry will be retained, Prime Minister Vladimir Putin said last month. The government is expected to spend 300 billion rubles 　(9.66 billion dollars) on these industries.

    Russian President Dmitry Medvedev established a commission on modernization and technological development in May with the aim of helping the commodity-based economy evolve into an innovative one.

    During the first session of the commission on Thursday, Medvedev listed five priority fields for Russia to develop its innovative economy, which are energy saving, nuclear technology, space technology, health care and information technology.

    Medvedev said it is necessary to begin the process of modernization without delay.     

Russian President Dmitry Medvedev speaks during a plenary session of the St. Petersburg International Economic Forum, the country's top business forum, in St. Petersburg, Russia, on June 5, 2009. (Xinhua/Lu Jinbo) Photo Gallery>>>

    SIGNS OF STABILITY

    The government's economic stimulus package has so far taken some effect. Russia's unemployment rate declined to 9.9 percent in May from 10.2 percent a month ago, marking its first fall since last September.

    Inflation rate in the year through June 15 fell to 7.1 percent. Officials estimated that this year's inflation rate will stand at 13 percent, 0.3 percentage point lower than last year.

    The foreign exchange market and stock market also show signs of stability. The Russian ruble has strengthened to 31 per dollar recently after the government used more than a third of its foreign currency reserves to stem the ruble's depreciation since last August.

    The benchmark Russian Trading System (RTS) index and the ruble-denominated Moscow Interbank Currency Exchange (MICEX) index have increased about 60 percent since the beginning of this year.

    Russia's Economic Development Ministry said the economy will rebound provided the government's assistance is allocated appropriately and oil prices continue to rise. The revised budget is based on a 41-dollar per barrel price for the Urals crude, the country's chief export earner, but oil prices have soared above that level already.

    Nevertheless, there is a growing concern that a strong ruble will not be conducive to exports. Some experts predicted that ruble will see another round of depreciation. As for the stock market, investors attribute the rally to speculation, saying the upward trend will end soon if there are no positive data.




Russian economy shows signs of stability, challenges remain

   MOSCOW, June 14 (Xinhua) -- The global financial crisis has hit the Russian economy after 10 years of expansion averaging almost 7 percent. Although recent statistics show signs of stability, it is believed that economic growth is unlikely to resume soon.

    Russia's gross domestic product (GDP) contracted by 9.5 percent year-on-year in the first quarter of 2009, according to the Federal State Statistics. In the same period, industrial output tumbled 14.3 percent and the foreign trade surplus plunged 43.6 percent. Full story