Finance Minister Anton Siluanov said on Friday Russia's economy could suffer a 4-percent contraction next year and see a budget deficit of 3 percent.
Siluanov told Russian reporters that the economy would contract 4 percent with oil prices around $60 a barrel, adding that he expected the ruble's exchange rate to be around 51 rubles per dollar.
"That's the exchange rate which according to our estimates corresponds to the balance of payments," he said.
He added that the government would have to further cut expenses or tap into reserves, noting that the planned 10 percent spending cut was not enough.
The central bank recently said the Russian contraction could be up to 4.8 percent at current oil prices, with a recovery not expected until 2017, but that was before it hiked interest rates by more than a third to 17 percent and which will also act as a drag on the economy.
The government had previously said it expected that the economy would slump by 0.8 percent next year.
Under the pressure of falling oil prices and Western sanctions over Ukraine, Russia is sliding into a full-blown economic crisis complete with the collapse of the ruble and growing inflation.
The ruble went through wild fluctuations last week, with the central bank raising interest rates to 17 from 10.5 percent to prop up the currency and Russians snapping up imported goods ahead of expected price hikes.