Russian President Dmitry Medvedev said Sunday that Russia's economy was hit harder than expected by the global financial crisis, but Kremlin measures helped the country avoid the worst-case scenario.

Russia's gross domestic product will drop by about 7.5 percent this year, compared with earlier forecasts of 3 to 3.5 percent, and industrial production fell by nearly 14 percent in the first half of 2009, Medvedev said.

"I must admit that we sunk below our lowest expectations," Medvedev told the state-owned Channel One network in an interview that aired Sunday. "The real damage to our economy was far greater that anything predicted by ourselves, the World Bank and other expert organizations."

Russia is facing its first recession in a decade, with gross domestic product down by an annual 10.9 percent in the second quarter of the year. The recession followed a crash in commodity prices, flagging foreign investment and a squeeze on credit markets.

Medvedev said that Russia faces a significant budget deficit next year that will surpass the September figure of almost 5 percent of GDP. "But it's not a tragedy, not a disaster for the economy," he said.

He also cited positive signs, including a sharp fall in inflation, the strengthening ruble and overall stability of the economy.

A recent rebound in oil prices has prompted Russian officials to give upbeat reports that the recession has bottomed out and that the country will start seeing moderate growth.

Medvedev said government measures have also reduced unemployment from its peak of 7.5 million, and praised the stabilization of the ruble, which lost a quarter of its value since last summer, but regained some of its losses in the past months.

The ruble still remains under intense pressure amid talk of a potential devaluation.

Medvedev reiterated his earlier pledges to diversify Russia's oil-dependent economy, but said it would take up to 15 years to develop stronger non-energy sectors that would account for up to 30 to 40 percent of GDP.