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.