Russian industrial output slumps 27.1 percent

MOSCOW (Reuter): Russia announced yet another catastrophic slump in industrial output yesterday, belying rosy estimates by top government officials that economic stabilization may be just around the corner.

The government's information bulletin said industrial output fell by a record 27.1 percent in February compared to the same month last year. Industrial output fell 16.2 percent last year after a fall of 18 percent in 1992.

The monthly output fall in the combined fuel and raw materials sector was 15.6 percent compared to a 17.8 percent slump in February 1993. Processing industries recorded a massive 37.9 percent drop, the worst slump yet compared to a 19.8 percent fall a year ago.

But not everyone is convinced that an economic collapse is in the making in Russia.

Only last week, acting Finance Minister Sergei Dubinin said the economy may be about to overcome the current crisis and the first signs of growth may appear before the end of 1994.

"We are approaching a new stage of economic development," Dubinin told a meeting with U.S. businessmen in Moscow.

Despite a fall in monthly inflation to 8.7 percent in March from a 1994 peak of 22 percent in January, the continuing output fall has forced the government to consider urgent measures to stimulate ailing industries.

Central Bank Chairman Viktor Gerashchenko said on Tuesday the annual discount rate of 210 percent may be cut to 110-120 percent by the end of the year if the fall in inflation continues.

The bank had raised its rate after a deflationary deal with the International Monetary Fund last May. Bankers warn that lower rates may fuel a flight into the dollar as markets have yet to be convinced that the fall in inflation is here to stay.