(Adds details, background)
MOSCOW, March 23 (Reuters) - Russia's inflation will likely slow this month and the economy will continue to shrink in year-on-year terms for the next two quarters, Deputy Economy Minister Andrei Klepach said on Monday.
Russia is expected to enter its first recession in a decade in the first half of this year, hit by lower prices for key energy and commodity exports and falling global demand.
At the same time, falling retail sales and lower wages are seen keeping a lid on inflation, which had been a major concern in authorities in pre-crisis days.
"It (this month's inflation) will be significantly lower than in February and lower than in March last year," Klepach told reporters.
Consumer prices have risen 0.6 percent in the first 16 days of March, official data shows, after an increase of 1.7 percent in the whole of February. In March 2008 prices rose 1.2 percent.
For 2009 as a whole, the Economy Ministry forecasts a gross domestic product contraction of 2.2 percent, while in the first quarter GDP is seen falling by around 7 percent year-on-year.
"There will be growth by the end of the year, in the fourth quarter. GDP contraction is expected in the second and the third quarter (year-on-year) ... but the scale of the slowdown will be smaller than in the first quarter," Klepach said.
"Compared to the first quarter there will even be some growth," he added.
His comments chimed in with those of First Deputy Prime Minister Igor Shuvalov, who on Friday said economic growth could return by the year-end [ID:nLK939971].
February data suggests that while the slowdown is still very much in full swing -- from job cuts to output reduction -- the pace of the contraction is stabilising or slightly slowing.
Investors are also cautiously turning more optimistic, with Citi upgrading Russia to overweight and forecasting that the benchmark RTS index <.IRTS> will be worth 50 percent more at the end of the year than at the start [ID:nLN308520]. (Reporting by Vlasta Demyanenko; writing by Toni Vorobyova; Editing by Andy Bruce)