Prime Minister Gives Russia Poor Marks for Its Economy : Europe: But he says the nation’s production crash appears to have ended.

Russian economic performance this year, despite improvements in some areas, remains unsatisfactory, Prime Minister Viktor S. Chernomyrdin told Parliament on Friday.

Real incomes dropped by 12% from January through September, Chernomyrdin said, and 40 million of Russia’s 148 million citizens are living below the poverty line, defined here as $68 per month.

The growing divide between Russia’s new rich and poor, together with the continuing backlog of unpaid wages, are perhaps the most damaging issues for the government here and are seen as boosting nationalist and Communist candidates in parliamentary elections to be held in December.

Russian President Boris N. Yeltsin’s spokesman said Friday that Yeltsin had also criticized the government for failing to pay pensions and salaries on time, or to compensate people who have lost their savings in investment swindles or bank collapses.

But on the bright side, Russia’s production crash appears to have bottomed out. Chernomyrdin said gross domestic product fell just 3% in the first nine months of this year; growth was recorded in industries such as metallurgy, chemicals, power generation, fuel, timber, pulp and paper and some machine-building sectors.

He said Russia’s progress in fighting inflation has been steady, if slower than expected. Inflation fell from 17.8% in January to 4.5% in September. In the past, autumn has brought an inflationary surge as a result of the government pumping out farm credits to help bring in the harvest. But October inflation is estimated at 4% to 4.5%, Chernomyrdin said.

That is above the 1.5% inflation rate that Russia had promised the International Monetary Fund it would achieve by year-end. But Chernomyrdin called it “sort of a record” for Russia.