UPDATE2: Russia to prepare new economic strategy to tackle crisis

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MOSCOW, Jan 22 (PRIME) -- The Russian government is preparing a new strategic plan, which will encompass economic development measures until 2020 and will be based on the new possibilities of the country’s economy and new targets for a “brand new growth,” Finance Minister Anton Siluanov said on Friday.

“The Finance Ministry is now working on measures and it will present them to the government for a prompt response in 2016 as well as measures of middle-term reaction,” Siluanov told a meeting the Finance Ministry.

“Since we see that this year we are implementing measures of a short-term plan, while the measures for 2017–2018-2019 are the goal which we will have to solve in the second half of the year.”

Presidential spokesman Dmitry Peskov said that President Vladimir Putin will meet the government to discuss the economic situation in the week between January 25 and January 31.

“Nothing extraordinary has been planned,” he said.

“There will be contacts with the government next week … We do not rule out other meetings devoted to the economic subject.”

Discussions of some narrower economic topics are not ruled out, he said.

MACROECONOMIC STABILITY COMES FIRST

Central Bank Chairwoman Elvira Nabiullina said that the strategic measures of the government, budgeting and monetary policy must not threaten macroeconomic stability.

“At present, we must not only focus our efforts on maintaining macroeconomic stability, which is our primary target, but also have a positive agenda for creation of conditions for economic growth on the back of new external conditions,” she said.

“Such a positive agenda must also cover financial markets, where the government, the central bank and the Finance Ministry have a lot of intersecting tasks… What is macroeconomic stability? It is low deficit, low debt and low inflation.”

The Russian economy still depends on oil prices, which are unlikely to rebound strongly, heavily, but this dependence is shrinking, Nabiullina said.

“The situation on the oil market is the key factor for the Russian economy… We can see an oil price rebound, but oil prices are unlikely to return to those high levels at which they stood a few years ago,” the chairwoman said.

At the same time, “the economy has adjusted to falling oil prices quickly, inflation began to slow down, and the ruble volatility became lower than oil price volatility, the costs of risk has started falling in line with return of Russian assets,” she said.

“The share of oil export in Russia’s total exports has already fallen from 67% in late 2013 to 48% in December last year. And dependence of the economy and the ruble on oil is shrinking. But, of course, we need structural measures to diversify the economy to cut this dependence on oil prices further.”

On Thursday, the Russian ruble declined to new all-time lows of 85.999 against the U.S. dollar and 93.7 against the euro after Brent price fell to $27.36.

BUDET DEFICIT OF 2-3% IN MIDDLE RUN

Siluanov said budget deficit must not exceed 2-3% of the Gross Domestic Product (GDP) in the middle run.

“Actually, the volume of debt will rise, but nevertheless, our budget deficit must not exceed 2-3% of the GDP. Here it is necessary to act very correctly in order to avoid boosting deficit and public debt,” the finance minister said.

The 2016 budget is based on an average oil price of U.S. $50 per barrel, but at present it is below $30. Budget deficit is estimated at 2.36 trillion rubles, or 3% of GDP. Revenues are expected at 13.738 trillion rubles and expenses at 16.099 trillion rubles.

Earlier Sulianov said that the government will have to reduce budget spending by 10% this year. Proposals to adjust the 2016 budget must be developed until the end of March.

Earlier in January, Economic Development Minister Alexei Ulyukayev said that the government was considering increasing budget deficit to 7-7.5% of the GDP in 2016 if oil prices remain at extremely low levels.

Russia is unlikely to have access to the global debt market in 2016, but the budget envisages foreign borrowings. The country’s external public debt stood at U.S. $50.129 billion and internal public debt amounted to 7.160 trillion rubles as of December 1, 2015, according to data of the Finance Ministry.

(83.5913 rubles – U.S. $1)

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