The economy declined 5.4 percent last month compared with March 2008, VTB Capital said in a report released on Monday.

VTB Capital's gross domestic product indicator also registered an average 4.4 percent contraction for the first three months of 2009, the worst decline since the economy shrank 5.1 percent in the fourth quarter of 1998, when Russia defaulted on its sovereign debt and the ruble lost two-thirds of its value.

"The Russian GDP indicator extended its February decline, with the manufacturing and service sectors remaining in contraction territory," said senior economist Alexandra Yevtifyeva in the report.

Manufacturers are facing climbing costs, but weak consumer demand is making it difficult for them to "pass higher costs onto their customers," said Yevtifyeva, who also noted that retail sales were down 2.4 percent year on year in February.

Purchasing power has been crippled by lower wages and the country's rising unemployment rates. In February, the State Statistics Service said 6.4 million Russians, or 8.5 percent of the economically active population, were unemployed. February joblessness represents a 5 percent increase from January and a 20 percent increase from that analogous period last year.

VTB Capital's forecast for 2009 is the latest in a string of even gloomier economic outlooks announced last week.

On Thursday, Deputy Economic Development Minister Andrei Klepach said the economy contracted 7 percent in the first quarter, a larger-than-expected decline.

But while the Organization for Economic Cooperation and Development and the World Bank predicted that the Russian economy would decline by 5.6 percent and a 4.5 percent, respectively, in 2009, the government is holding fast to its official forecast of a 2.2 percent fall.

"We are not going to revise our forecast in the near future," a ministry spokeswoman said by phone on Monday. The spokeswoman also added that "the first quarter is traditionally down," and that the anti-crisis measures could reverse the downward trend in future quarters.

The ministry's prediction has taken into consideration the government's proposed 1.4 trillion ruble ($42 billion) anti-crisis package, Klepach said Thursday. Without the boost in emergency spending, the economy could fall as much as 5 percent, he said.

Prime Minister Vladimir Putin submitted the anti-crisis measures and the revised federal budget to the State Duma for approval on Monday.

The Economic Development Ministry is unlikely to adjust its GDP forecast downward as long as oil prices remain stable.

"There isn't an overwhelming need to revise it yet," said Ronald Smith, head of research at Alfa Bank.

"If oil sticks in the mid 50s, you will see a lower rate of decline in the economy," Smith said by phone Monday.