(Adds interventions, analysts, recasts)
By Toni Vorobyova
MOSCOW, Jan 19 (Reuters) - Prime Minister Vladimir Putin ordered the 2009 budget be reworked at half the originally planned oil price on Monday, as Russia pressed on with now-daily rouble devaluations to adjust to the worsening economic outlook.
The slump in the oil price, Russia’s key export, has taken a heavy toll on the rouble, prompting the central bank to spend a quarter of its reserves to cushion the currency’s fall and to embark on a process of controlled devaluation from November. For the state budget, conversely, the currency’s slide helps make up for some of the drop in oil prices by upping the number of roubles Russian companies and the budget get for each dollar in oil revenue.
The initial budget assumption for oil was $95 per barrel. “The Finance Ministry should amend the state budget using the price of oil of $41 per barrel,” said Putin, whose chances of returning to the Kremlin as President in 2012 hinge on handling the economic crisis.
The slide in Russian financial markets, dating back to the war with Georgia and worsening of the global financial crisis last year, deepened on Monday. The rouble RUBUTSTN=MCX fell to 37.83 versus a euro-dollar basket RUS=MCX, while the RTS .IRTS stock index hit its lowest levels since August 2004.
The sixth mini-devaluation for the rouble since the start of the year brought the currency’s losses since August to over 22 percent, but dealers said the central bank had also had to intervene heavily to stop the currency falling further.
Economy Minister Elvira Nabiullina told a cabinet meeting that $41 per barrel oil meant the rouble should average 35.1 per dollar in 2009 provided the euro trades at $1.4 EUR=.
“It (the new oil forecast) will result in a serious balance of payments deficit of more than 2 percent,” said Gintaras Shlizhyus, analyst at RZB in Vienna.
“It will also be difficult from the point of view of revenues, we can expect the first budget deficit (in a decade),” he added, forecasting that the year’s economic growth would likely be between 1 and zero percent.”
Russia’s Urals crude URL-E fell to $39 on signs of a resolution of a gas row between Russia and Ukraine and after a ceasefire between Israel and Hamas in Gaza eased supply concerns.
Finance Minister Alexei Kudrin, visiting Hong Kong on Monday, said the oil price may fall below $40 per barrel, suggesting that gloomier forecasts are also under review. But other analysts and officials expressed optimism that the average price for 2009 may meet the government’s forecast.
Last month Kudrin said the 2009 budget deficit would amount to 5 percent of its gross domestic product based on $50 oil.
Russia has stashed $206 billion in rainy day funds, which should enable it to sustain the deficit for some time. But spending that money will put further pressure on reserves, already down over a quarter since August, and on the rouble.
Supporting the currency at the new weaker level cost the central bank $10 billion on Monday alone, dealers estimate.
The interventions — possibly a record daily amount since Russia began supporting the currency five months ago — are equivalent to $70 for every Russian citizen, and is more than Ukraine paid for Russian gas during the whole of last year.
Officials say moving the currency gradually has allowed millions of ordinary Russians, and companies, to shift roubles into foreign currency without panic — unlike the collapse in Russia’s 1998 economic crisis, which caused widespread hardship.
But some market players say the high levels of interventions show the gradual devaluations are not working and call for a bigger one-off move, or even the launch of a free-float.
“I think a sharper weakening is unavoidable (in the near future); without that it will be very difficult for the central bank,” said a currency dealer at a major European bank.
The new 2009 forecast implies the rouble should average 41.4 to the basket, made of 0.55 dollars and 0.45 euros. That assumes another 10 percent devaluation, less than priced in by the market through non-deliverable forward contracts which show the rouble at 42.28 to the dollar a year from now RUBNDF=GFI.
Kudrin and First Deputy Chairman of the central bank Alexei Ulyukayev are known advocates of the free-float as part of a shift to inflation targeting regime, which, they say, will allow Russia to defeat inflation, expected to hit 13 percent in 2009.
“We believe they should abandon the strategy of gradual depreciation and move to a dirty float to protect the central bank’s forex reserves and focus on supporting growth,” said Elina Ribakova, analyst at Citibank.
— For a FACTBOX on rouble depreciation see [ID:nRUBFACTS] (Reporting by Toni Vorobyova, writing by Gleb Bryanski; Editing by Ruth Pitchford and Patrick Graham)