Russia's economy returns to modest growth next year, but faces medium-term risks from volatility in crude oil prices, the International Monetary Fund said.

An IMF assessment found the Russian economy contracted by 3.7 percent last year because of the collapse in crude oil prices. The economy remains in recession this year before growth resumes at an estimated 1 percent next year.

"The Russian economy will need to adjust to the challenge of persistently lower oil prices by reducing its dependence on oil and energy exports over the medium term," an IMF board assessment read.

The Central Bank of Russia estimated second quarter gross domestic product could decline between 0.2 percent and 0.5 percent. With oil prices holding at about 50 percent of 2014 levels, Russian Prime Minister Dmitry Medvedev said a sustainable Russian economy can no longer depend on the sale of oil and natural gas.

The IMF in its assessment found this level of fiscal flexibility meant the Russian economy was cushioned somewhat by the strains from lower oil prices and the fallout from Western sanctions imposed because of the Kremlin's association with crises in Ukraine and the annexation of the Crimean Peninsula.

Russian financial planners framed the 2016 budget on oil priced at around $50 per barrel, a price target in line with recent trading sessions.

The IMF said long-term the forecast for the Russian economy was that growth would hold steady at around 1.5 percent.

"A fall in oil prices is the main risk to the outlook," it said.

In June, the Central Bank of Russia cut its key interest rate by a half percent to 10.5 percent annually, saying economic growth was "imminent." By the bank's estimate, growth of 1.6 percent in GPD is expected next year.

In its monthly market report for July, the Organization of Petroleum Exporting Countries said it expected Russian oil supplies would increase slightly to average almost 11 million barrels per day in 2016, a level that's higher by 10,000 bpd from the previous estimate. More narrowly, however, second quarter output was 40,000 bpd lower than the first quarter average.

By OPEC's estimate, Russia's economy expands by 0.7 percent year-on-year in 2017.