Russian economy shrinks more than expected

President Dmitry Medvedev has declared that Russia's economy will shrink by more than originally forecasted this year. 

Government is set to run a budget deficit of at least 7 per cent of GDP.

Elvira Nabiullina, Economy Minister of the country, stated that the economy may contract as much as 8 per cent this year, which is a steeper decline than the ministry had forecasted in January. 

It should be reminded that the downturn in Russia's economy during the first quarter was the worst contraction in 15 years, with an annual 9.5 per cent. Mainly the situation was caused by slump in industrial production and plunge in demand for exported commodities.

Furthermore, Nabiullina said, a 3 trillion-ruble ($US97 billion) stimulus package, which was revised to include a deficit of 7.4 per cent of GDP in April, would be contributed to Russia's recovery from the middle of the year.

Commenting on the situation, Arkady Dvorkovich, Medvedev's top economic adviser, stated the government's budget policy would be based on a "conservative" estimation of the oil price.