Russia's economy expanded in the first quarter at the fastest pace in six years, as production of electronics, building materials and other industrial output increased.

Gross domestic product grew an annual 7.9 percent in the first quarter, compared with 5 percent in the first quarter of last year, the Moscow-based Federal Statistics Service said on its Web site today. The figure nearly matched a median forecast of 7.8 percent of 10 economists surveyed by Bloomberg.

Russian leaders including President Vladimir Putin have warned that the $1 trillion economy, the world's 10th largest, relies too much on oil and gas sales to sustain growth. Still, nine years of growth has also increased spending power, prompting companies such as electronics maker OAO Sitronics, builder PIK Group and brewer OAO Baltika Breweries to raise output.

The economy, which expanded 6.7 percent last year, will probably advance 6.5 percent this year, according to government forecasts.

The growth, boosted by energy sales, has trickled down into the economy in the form of higher salaries in other industries and increased retail sales, economists said.

Real wages surged 18.5 percent first four months of the year, boosting the average monthly wage to 12,510 rubles ($480), while retail sales jumped 13.4 percent in the first quarter, compared with 10.4 percent in the year-earlier period, according to the Federal Statistics Service's figures.

Russian companies are raising funds abroad to buy machinery, equipment and to invest in new production facilities, said Morozov. Warm winter and higher foreign direct investment also boosted output.

Industrial output increased 7.9 percent in the first quarter of the year, compared with 4.1 percent in the same period last year, according to the Federal Statistics Service.

Russia received more than $60 billion in net capital inflows this year, exceeding the record $41.6 billion the nation lured last year. Foreign direct investment reached $9.756 billion in the first quarter, up from $3.845 billion in the first quarter of 2006, according to the Federal Statistics Service.