RUSSIA STILL FACES BUDGET SQUEEZE…

Figures just released for Russian economic performance in the first half of the year show that the financial crisis that began last October has caused a prolongation of the country’s eight-year economic recession. In the first six months of 1998, GDP fell by 0.5 percent compared to the same period last year. Industrial production rose 0.1 percent and retail turnover rose 3.1 percent, but real money income fell 9 percent. Investment fell 6.3 percent and foreign trade turnover fell 4.7 percent. The one bright spot was inflation, which was running at a modest annual rate of 8.2 percent. (Finansovaya gazeta, No. 28, August)

The ongoing recession will make it more difficult to raise taxes. The federal budget in the first half of the year showed income of 128 billion rubles (US$20 billion), which is 20 percent higher than in the same period of 1997 but still well below federal spending, which was 184 billion rubles. Of that sum, 62 billion was spent servicing the national debt. In July the federal government raised 12.1 billion rubles (US$1.9 billion) in taxes, a six percent increase on June, but August receipts are expected to fall short of the target of 14.8 billion rubles.

…AMID FEUDING BETWEEN CENTRAL BANK AND FINANCE MINISTRY.