Jan. 23 (Bloomberg) -- Russian industrial production slumped the most since at least 2003 in December as the global slowdown crippled demand for steel, cars and coal, pushing the economy closer toward a recession.

Output shrank 10.3 percent after falling 8.7 percent in November, the Moscow-based Federal Statistics Service said today. The median estimate in a Bloomberg survey of 13 economists was for a 10 percent decline. In the month, production grew 3.8 percent. The figures were announced yesterday by central Bank Chairman Sergey Ignatiev. Growth for the year was 2.1 percent, the slowest since at least 1999, according to the service’s Web site.

Steelmakers slashed output by half in the last six months of 2008, according to UralSib Fianancial Corp., as the world economic slowdown eroded orders from builders and automakers while the credit crunch dried up loans for cars, homes and appliances. The Economy Ministry expects the economy to shrink 0.2 percent this year, the first contraction since 1998. Exports may tumble 43 percent, sending the budget toward its first deficit in 10 years.

Manufacturing fell an annual 13.2 percent in December, compared with a decline of 10.3 percent in November, as steel-pipe production dropped an annual 35.3 percent and coking coal output plunged 44.2 percent. Truck production plummeted 67.1 percent.

Mining and quarrying contracted an annual 2.3 percent in December as iron ore output fell an annual 45.6 percent.

OAO Metalloinvest, Russia’s biggest supplier of iron ore, resumed output of pellets at its Mikhailovsky GOK unit on Jan. 11 after reducing stockpiles.

Electricity, gas and water output shrank 6.1 percent in December.

To contact the reporter on this story: Alex Nicholson in Moscow at anicholson6@bloomberg.net.

Last Updated: January 23, 2009 06:00 EST