Russia's economy 'to drop by 7.5%'

Russia's economy could shrink by 7.5 per cent, because the global financial crisis has hit the country harder than expected.

President Dmitry Medvedev said during the weekend the Kremlin's intervention measures had helped the country from suffering an even worse decline.

The president announced the forecast GDP drop of 7.5 per cent, which he said was 'serious', telling Russian television viewers that the damage was greater than expected.

The country has been hit particularly hard by the fall in energy prices, but the president did say the economy was benefiting from low inflation.

He said on air: 'I must admit that we sunk below our lowest expectations. The real damage to our economy was far greater that anything predicted by ourselves, the World Bank and other expert organizations.'

Last month, Russian prime minister Vladimir Putin put the expected decline in GDP at eight per cent.

'We were ultimately able to make fairly good use of anti-crisis measures to avoid the worst possible scenarios in terms of unemployment and direct financial consequences from the crisis, as well as effects on the work of the banking system,' Mr Medvedev added.

'Our banking system withstood the stress, and now it is doing just fine.'

He also said Russia's currency, the rouble, was 'calm and stable'.