Russia's leaders are warning the government will need to make more cutbacks if the nation is to avoid a repeat of the 1998 financial crash, the country's biggest post-Soviet economic trauma.

The economy, which is heavily reliant on its massive oil and gas industry, is getting hammered by the plunge in global energy prices. State revenues are running dry and the cost of living is soaring for Russians as the currency drops.

Faced with the prospect of the economy languishing in recession in an election year, the government sought Wednesday to manage expectations.

"Our task is to bring the budget in line with new realities. If we don't do that, then the same thing will happen as in 1998 and 1999, when the people pay through inflation for what we haven't done," finance minister Anton Siluanov was quoted as saying by state news agency Tass.

At the time, Russia devalued its currency and defaulted on its debts, events that caused inflation to jump to around 85 percent. Analysts say Russia's situation is not as dire now, as it has very little debt. But its economic prospects grow darker as energy prices drop.

The International Monetary Fund forecast in November that the Russian economy would shrink by 0.6 percent in 2016. Since that estimate was made, oil has dropped almost another 40 percent, to about $30 per barrel. The Russian budget drawn up in October is based on oil at $50 a barrel.

That leaves few opportunities for the government's traditional largesse to voters ahead of September's parliamentary elections, a key test for the ruling United Russia party, which has much lower levels of popularity than President Vladimir Putin's soaring personal ratings. The last legislative elections in 2011 saw United Russia win a majority but were dogged by allegations of electoral fraud that led to street protests.

In a warning against "populism" at a conference in Moscow, Prime Minister Dmitry Medvedev tried to temper hopes for the future.

Quoting former British Prime Minister Margaret Thatcher, he said "there can be no liberty without economic liberty," before adding: "However, liberty does not come without responsibility ... It's always nice to make promises about a bright future, but promises must be kept."

As Russia burns through once-ample cash reserves, the budget adopted in October increasingly seems a relic.

"If the oil price continues to fall, the parameters of the budget will require correction," Medvedev said. "That needs to be understood. We need to prepare for the worst-case scenario, as other countries are doing."

Following 10 percent cuts in most budget areas in 2015, with a few exceptions such as military spending, further reductions will be a test of public support for the government. Alexander Zhukov, a senior United Russia figure who is also deputy speaker, said Wednesday the ax would likely fall first on investment projects, something he said was "deeply unpleasant" but necessary to avoid painful cuts to social spending.

Consumer price inflation was over 12 percent last year, accompanied by increasing cases of unpaid wages and particular concern over rising food prices pushed up by Russia's ban on food imports from the European Union and other countries.

On the opening day of the Gaidar Forum in Moscow, traditionally a start-of-year showcase for Russian government policy following the 10-day New Year break, there was a mood of grim endurance.

Leading figures did not echo the assurance that Putin regularly made in the fall that "the peak of the crisis is behind us," instead focusing on the challenges yet to come. Low energy prices are the "new normal," Economic Development Minister Alexei Ulyukayev said.

Ulyukayev said that the budget deficit could hit 7.5 percent of GDP in 2016 because of the low oil price, compared to a planned deficit for 3 percent outlined in the budget, in comments reported by RIA Novosti.

To raise funds, privatization of state-owned banks and oil company Rosneft has been discussed, though similar ideas have been raised in the past to no avail.