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. Last Updated: 07/27/2016

Putin Defends Record on Economy

Prime Minister Vladimir Putin told the State Duma on Monday that Russia faces a difficult year ahead but said a 3 trillion ruble ($90 billion) package would pull Russia out of its worst economic crisis in a decade.

The country is on the brink of recession after a senior government official said that the country's $1.7 trillion economy contracted by 7 percent in the first quarter.

The government will divert 1.4 trillion rubles ($42.6 billion) from the federal budget to fight the crisis on several fronts, including strengthening the banking system and social welfare programs. But total crisis measures, including tax relief, will come to 3 trillion rubles, Putin said.

In his first annual address to the Duma as prime minister, Putin said the country's banking system was now out of trouble after narrowly averting collapse.

"The threat of the collapse of the banking system has receded," Putin said. "But [the threat] was quite real, it was literally on the edge."

The banking sector came under huge pressure last fall after the country's stock markets plunged and external creditors froze lending. Lending all but ceased to the real economy, stalling many projects.

That combined with sliding oil prices and lower global demand have reversed nine years of robust economic growth, fueled by high oil prices and a consumer boom.

Putin said banks that received state support have boosted lending by 15 percent in the past five months — an indicator that money is starting to move into the real economy. Banks that did not receive help upped lending by 7 percent, he said.

The prime minister again deflected blame for the crisis, which he has repeatedly accused the United States of starting.

"The problems did not arise first with us … but they affected everybody," he said.

Some economists and politicians have said Russia has been hit particularly hard because it remains heavily dependent on energy exports. They have also criticized the government's handling of the crisis for being too slow and not broad enough in scope.

The Duma set aside Monday afternoon for Putin to give the speech and then field questions on his anti-crisis plan.

The Communists and the ultranationalist Liberal Democratic Party deputies were likely to quiz Putin, along with deputies from the pro-Kremlin parties United Russia and A Just Russia.

The government is are worried that wage cuts and job losses could undermine the social stability that Putin prided himself on achieving while president.

The rebound in oil prices has eased some of those concerns, at least in the short term. Russia's Urals blend of oil was trading at $49 a barrel Friday, $8 higher than the $41 level factored into the revised 2009 budget.

But some economists are still saying that the economy could shrink by more than 8 percent this year, nearly four times worse than the government expects.

That could make 2009 the worst year for the economy since the early 1990s, with a sharper contraction than 1998, when Russia defaulted on domestic debt. (AP, Reuters)