After a decade of high growth, the Russian economy is experiencing a slowdown in the wake of the global financial crisis. While Russia's strong short-term macroeconomic fundamentals make it better prepared than many emerging economies to deal with the crisis, its underlying structural weaknesses and high dependence on the price of a single commodity make its impact more pronounced than otherwise. Prudent fiscal management and substantial financial reserves have protected Russia from deeper consequences of this external shock. The government's policy response so far swift, comprehensive, and coordinated has helped limit the impact. Short-term macroeconomic stabilization has to be the immediate priority as the authorities continue to adjust their short-term policy responses to changing economic circumstances. But the crisis also presents an opportunity to address the medium to longer term challenges of competitiveness, economic diversification, and financial sector modernization which are necessary to boost growth and living standards. This would ensure that Russia emerges from this global crisis with a stronger basis for dynamic, productivity-led growth and is better placed to take advantage of global integration. In the first six months of 2008, real gross domestic product (GDP) growth in Russia continued at a brisk pace of about 8 percent, reflecting a booming economy and strong macroeconomic fundamentals. This growth exceeds the long-term potential of the economy (estimated in the 6-7 percent range), with clear signs of overheating. An upturn in inflation, a decline in unemployment, a rise in capital utilization, and real wages significantly outpacing productivity growth all indicated an overheating economy against the backdrop of binding supply (infrastructure) constraints.