MOSCOW - The Russian government warned that the recession will be much deeper this year than expected amid the first signs that the widening crisis is beginning to dent the once-bulletproof popularity of Prime Minister Vladimir Putin and President Dmitry Medvedev.
Combined with a sharp drop in the price of oil in the U.S., the blizzard of bad news sent the ruble more than 2% lower as shares on the country's two main stock exchanges tumbled 9.4%, the most in almost five weeks, prompting regulators to temporarily halt trading. The ruble weakened Tuesday, trading late in the day at 40.45 against a basket of dollar-euro currencies. Russia is trying to keep the ruble from falling below 41 to the basket.
As economic pain has spread further and deeper into the real economy, idling factories and putting hundreds of thousands of Russians out of work, the government has begun to talk about the crisis with greater realism. President Medvedev for example addressed the nation on Sunday in the first of a series of crisis-related fireside chats and used unusually plain language.
The government's message is that things are going to get worse before they get better but that its huge foreign-currency reserves, of more than $380 billion, the third largest in the world, will see it through.
Deputy Economy Minister Andrei Klepach said Tuesday that the Russian economy, which has boomed for the past eight years, will "probably" contract by 2.2% this year, a hard landing for an economy used to 8% growth. He blamed a sharper-than-expected 14% drop in investment this year. Previously government officials had predicted the economy would shrink just 0.2%, a forecast that independent analysts said was optimistic, given depressed commodity prices. Mr. Klepach said inflation will probably be higher than expected in 2009 -- as much as 14%, up from a previously forecast 13%.
The bleak new forecast followed grim industrial-production data on Monday that showed output in January plunged 16% from a year earlier, the steepest fall in years. Meanwhile, wage arrears, a prime cause of social unrest in the 1990s, increased by almost 50% last month, affecting half a million people.
President Medvedev said on Tuesday that the government will be forced to make deep cuts in its budget because of the drop in the price of oil, Russia's main export earner. Officials said that Russia will run a budget deficit as large as 8% this year and that it will need to dip into rainy-day money to cover the shortfall. Mr. Putin described the 2009 budget changes as an "optimization," pledging to preserve and even increase some social spending.
But he said tumbling global oil prices had halved the oil revenues the government expected to pour into the budget. In a further sign of tighter finances, a senior government minister announced -- for the first time -- that the Kremlin would need to reduce the amount it spends on hosting the Winter Olympics in Sochi in 2014.
The negative news came as data from the Russian Public Opinion Research Center, a state-owned pollster, showed that the crisis is beginning to take the shine off Messrs. Putin and Medvedev's previously stratospheric poll ratings. The number of people who approved of Mr. Putin's work fell to 74% in February from 81% in September. The number of people who approved of Mr. Medvedev's performance fell to 69% in February from 79% in September.
Valery Fyodorov, the polling center's director general, played down the figures, saying data due out Wednesday will show less dramatic declines. He said the lower figures showed the ratings were returning to their "normal level" after what he said was an unusual spike caused by Russia's short victorious war against Georgia last year.