The government said Friday it had increased its gross domestic product and industrial output forecasts for this year, but warned that without more reform the economy would not expand further.

The Economic Development and Trade Ministry said on its web site (www.economy.gov.ru) that it had increased its GDP forecast to 3.9 percent from 3.8 percent and industrial output to 4.4 percent from 3.7 percent.

The ministry said July GDP growth stood at 5.3 percent in year-on-year terms, compared with 5.8 percent growth last July. GDP growth in June was 4 percent. Cumulative GDP for the first seven months of 2002 was 4 percent higher than a year earlier -- slightly more than the 3.8 percent year-on-year increase recorded in the first six months.

Alexei Zabotkin, chief economist at United Financial Group investment bank, said he was surprised by a GDP revision of just 0.1 percent. "Given the quality of our statistics, this is within the error area and essentially does not change anything," he said.

The ministry said the nonferrous metals industry made the largest contribution to industrial growth in the first seven months of the year, expanding 10.2 percent over January-July 2001. The food industry came second with an 8.5 percent rise, while the oil sector was third with an 8.2 percent expansion. But the ministry warned that without further reforms, the economy would not be able to keep expanding. "The possibilities of supporting sustained growth within the current ... structure and capacities are close to exhaustion," the ministry said.

(The Moscow Times 26.viii.02)