Russia's economy will shrink by around 4 per cent next year as a result of falling oil prices and ongoing financial turmoil, its finance minister has warned. Anton Siluanov said lower revenues would force the Government to increase its budget deficit and raid reserves to make up the shortfall.

His warnings came as President Vladimir Putin scrapped New Year holidays for Government officials because of the unfolding economic crisis.

"If incomes are lower and the main spending is fully financed, then we'll have to use reserves and increase the deficit," said Siluanov.

He said if oil prices stayed around US$60 a barrel the economy would contract 4 per cent and the budget deficit would be "considerably higher" next year.


"One year with a deficit isn't so scary, the most important thing is to prepare future budgets," he said. It came as Russia's central bank said authorities had quadrupled the amount they would pump into the Trust Bank in the country's second-largest bank bail-out.

The state will provide up to 1.5 billion ($3 billion) in loans to the lender, which became Russia's first victim to a huge slide in the rouble this week.

The central bank initially said Russia would inject up to 350m to prevent its collapse. Yesterday, it said the loan would be bolstered with another for up to 1.2b over 10 years

On Christmas Day, Putin banned officials from taking time off in January. Employees are usually entitled to time off to celebrate the New Year.

"For the Government, for your agencies, we cannot afford this long holiday, at least this year," Putin said.

-Telegraph Group Ltd