The indicator showed the economy contacting 5.4 percent year on year in March, the lowest level since the indicator was started in May 1998, after shrinking 4.7 percent in February.
The indicator slipped into contraction territory in December, as Russia heads for its first recession since the 1998 financial crisis, ruble collapse and sovereign default.
The Total Activity Index stood at 42.1 in March, the highest in five months, but still lower than in any period covered prior to November 2008.
"The Russian GDP Indicator extended its February decline, with the manufacturing and services sectors remaining in contraction territory," VTB Capital senior economist Alexandra Yevtifyeva said in the report.
"However, as the pace of deterioration in both sectors has moderated, we could soon see a softer decline in the GDP Indicator.
"The drop in official first quarter 2009 GDP, though, might exceed the 4.4 percent year-on-year decline estimated by the GDP Indicator as the latter does not take construction (which has been severely hit) into account."
Yevtifyeva said the 4.4 percent drop was the second-lowest quarterly average to date, since the indicator registered an average of minus 5.1 percent in the final quarter of 1998.
"The most significant warning sign in the latest survey is the record drop in employment. This suggests that the weakness in consumption (retail sales were down 2.4 percent year-on-year in February) might be protracted."
"Companies' costs, while still rising, advanced at a slower rate in March, suggesting that the cost pressures from the weaker ruble and tariffs hikes are dissipating. This bodes well for the inflation outlook this year."
"Furthermore, the weakness in demand continues to limit the ability of Russia's manufacturers and service providers to pass higher costs on to their customers."
VTB Capital derives the GDP indicator from its surveys of manufacturing and service sector purchasing managers.
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