Russia's gross domestic product shrank 3.7 per cent last year, the Federal State Statistics Service reported Monday, citing preliminary estimates.
This marks the biggest decrease since 2009, when a global financial crisis triggered a contraction of GDP by about 8 per cent.
Now Russia's oil-dependent economy is suffering from plummeting prices amid a global glut of supply, as well as Western sanctions against the country imposed over its role in the Ukraine crisis.
The rouble currency weakened to a record low against the US dollar last week, surpassing 85 roubles per dollar. Foreign direct investments in Russia fell by 92 per cent last year, the United Nations Conference on Trade and Development reported.
"Oil's volatility is quite bad in terms of negatively affecting investors' outlook on the Russian economy," Maria Snegovaya, a columnist for one of Russia's most respected newspapers, the business-focused Vedomosti, told dpa.
"Recently, Bank of America Merrill Lynch estimated that for a balanced fulfillment of Russia's federal budget for 2016 under oil prices at 25 dollars per barrel, the dollar should cost 210 roubles," Snegovaya said by email.
Last week, Russia's former finance minister, Alexei Kudrin, predicted that the price of oil could drop from about 30 dollars per barrel currently to as low as 16 dollars.
Snegovaya named "the declining rates of growth in China, the shale oil revolution, the repeal of Iran sanctions and the explosive growth of alternative energy" as some of the longer-term factors in driving down oil prices.