With the Russian commodity based economy shrinking, President Dmitry Medvedev has warned his government to curb spending focusing only on crucial needs.

New official figures show the economy shrinking 9.5 percent year-on-year in the first quarter. That has blown huge holes in the Kremlin’s budget plans which were based on a forecast of a 2.2 percent decline in GDP for the whole year and higher oil prices. Medvedev told government officials and top lawmakers: “The global economic crisis is far from over. Unfortunately, in 2009, we expect a fall in gross domestic product that is greater than we had initially predicted.” Medvedev explained there will be a budget deficit of at least seven percent of GDP. He added “and that’s optimistic.” His finance minister said they will have to borrow billions but not from the International Monetary Fund.More about: Economy, Financial Crisis, Russia

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