Russian economy in nose-dive

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MOSCOW - President Boris Yeltsin shrugged off disastrous economic statistics yesterday and said Russia was on the road to recovery writes Tony Barber.

'I think that in December or January there will be a stabilisation of prices, and then they will gradually go down while salaries will go up,' he told residents in the southern Russian city of Astrakhan. He put a brave face on the latest data from the National Statistics Committee, which showed that one-third of Russians now earn a mere 2,000 roubles a month. With the rouble at 627 to the pound, that is worth scarcely more than pounds 3 and is only enough to buy a loaf of bread, a kilogram (2.2lb) of potatoes, a kilogram of butter and a litre of milk every day for eight days.

The figures also showed that unemployment is beginning to grip Russia, with 920,000 people registered as out of work on 1 October and another two million on part-time work or unpaid leave. Inflation, which the American economist Jeffrey Sachs said recently was about to take Russia 'over the cliff', is running at an annual 1,000 per cent or more.

According to the figures, industrial production dropped by 17.6 per cent in the nine months since Mr Yeltsin launched his market reforms at the start of this year. In July, August and September output fell by 22, 27 and 25 per cent respectively.

From January to September, the Russian state budget deficit soared to a dizzy 716bn roubles, partly because Mr Yeltsin's reformist government caved in before its critics in April and agreed to extend vast credits to unprofitable state enterprises in danger of going bankrupt. Russia's printing presses work night and day to produce the banknotes needed to keep up with the inflation.

Russia's economic disarray is so serious it seems certain the government will not be able to meet the inflation and budget deficit targets set by the IMF as a condition for aid.