By mid-1996, restrictive fiscal and monetary policies have brought lower inflation and exchange rate stability to Russia. The mass privatization was an apparent success although it contributed to an unclear ownership structure and weak corporate governance. The production decline continues and the structure of the Russian economy has been deteriorating. The popular dissatisfaction with the drop in living standards is reflected by a deep split in society, despite Mr. Yeltsin's victory in the presidential elections. As in the recent past, the new government will continue with 'stop-and-go' reform policies, probably with a stronger accent on the protection of domestic producers, legal reforms and economic growth. Because of serious structural and institutional distortions, the Russian economy is more likely to stagnate than to grow strongly in the near future. Copyright 1996 The European Bank for Reconstruction and Development.