* GDP shrinks 0.5 percent in first quarter
* Minister urges caution on dollar, euro investments
(Adds quotes, context)
MOSCOW, April 16 Russia's economy shrank in the
first three months of this year, Economy Minister Alexei
Ulyukayev said on Wednesday, highlighting the impact of tensions
over Ukraine as Russian money fled abroad.
Ulyukayev also said Russia should put more of its oil wealth
into building infrastructure at home and be wary of investments
in euros and dollars.
The EU and United States have imposed visa bans and asset
freezes on some Russian individuals, and are contemplating wider
sanctions as international tensions persist over eastern
Ulyukayev told parliament national output fell 0.5 percent
compared with the last quarter of 2013, although it grew by 0.8
percent year-on-year in the first quarter.
He said the downturn reflected "a substantial reduction in
capital investment", which fell by 4.8 pct in the first quarter
compared with a year earlier.
Consumption was stronger, with retail sales growing by 3.2
percent in the first quarter. However, the minister cautioned
that may not be sustained because it reflects one-off public
sector pay increases.
Ulyukayev said Russia should spend a bigger share of its $87
billion National Welfare Fund on domestic infrastructure
projects, rather than investing in western securities, because
of geopolitical risks.
"We should be cautious about investing in securities
denominated in dollars and euros. It would be better to invest
the means of the National Welfare Fund in Russian infrastructure
projects," he said.
He also called for spending additional budget revenues
gained from a weaker rouble, which he estimated at 900 billion
roubles ($25 billion) this year, arguing that budget rules
requiring the government to save such revenues in its Reserve
Fund were too stringent.
Such calls put Ulyukayev at loggerheads with the Finance
Ministry, which argues for fiscally conservative policies.
Finance Minister Anton Siluanov has publicly rejected calls
to revise fiscal rules that limit the amount the country can
borrow and spend.
(Reporting by Jason Bush and Megan Davies; Editing by Ruth