Russian president Vladimir Putin chairs a meeting with members of the government via video link at the Kremlin in Moscow, Russia on 8 July 2022Reuters

Russia will post a budget surplus this year, President Vladimir Putin said on Wednesday, forecasting a much shallower economic contraction than previously thought as Russia has overcome the worst impact of Western sanctions.

Putin's expectation of a GDP decline of around 2 per cent is more optimistic than his economy ministry and Russia's two largest banks, but follows the trend of improving forecasts as the effect of sanctions imposed against Moscow over Russia's actions in Ukraine is analysed.

"Our state finances have stabilised. I would like to note that this year's budget will be executed with a surplus of almost half a trillion roubles, somewhere around 485 billion roubles ($7.93 billion), Putin said at Russia's Eastern Economic Forum in Vladivostok.

Putin said budget spending was up 20 per cent on last year's levels, something that he said was bound to have an impact on the economy.

"Our experts believe that the peak of the most difficult situation in our country has passed," Putin said. "The government was able to prevent a negative turn of events thanks to effective, dynamic and calibrated measures."

Russian Economy Minister Maxim Reshetnikov said on Tuesday the economic contraction this year would be 2.9 per cent, shallower than previously forecast. Top lenders Sberbank (SBER.MM) and VTB (VTBR.MM) envisage a 4.5 per cent and 4 per cent contraction, respectively.

Meltdown may have been averted - the economy ministry at one point predicted that the economy would shrink more than 12 per cent this year, exceeding the falls in output seen after the Soviet Union collapsed and during the 1998 financial crisis - but economic hardships remain for many.

Consumer prices have risen sharply this year and a survey by state polling agency VTsIOM showed that 64 per cent of people in Russia had no savings as of mid-February.

Putin, despite asserting that Russia was coping with what he termed "the West's economic, financial and technological aggression," acknowledged challenges.

"Of course we see problems in several industries and regions, in some businesses in the country, especially those who were dependent on supplies from Europe or supplied their products there," Putin said.