10 Mar 2010 16:41

Russia could have 6.2% public deficit in 2010

MOSCOW. March 10 (Interfax) - Russia could have a budget deficit of 6.2% of GDP in 2010, Ksenia Yudayeva, director of the Macroeconomic Research Department at Sberbank , told reporters.

Analysts previously forecast 7.2% deficit. "We've looked at this and we now get 6.2%," Yudayeva said.

GDP could grow 3.8% this year, the bank says.

The ruble could appreciate slightly. "It'll depend on oil prices. Prices have been more or less stable in the last half year," Yudayeva said, adding that the ruble would strengthen if oil prices rose. Oil prices could edge up in the short term, she said. Yudayeva's Center is forecasting an average $73 a barrel for 2010.

Yudayeva said she expected the budget deficit to contract in the years to come. "We had no deficits for almost ten years prior to the crisis, and now we're in a new situation where we'll have deficits for several years to come. I'm hoping they won't be large, but there will be deficits," she said.

Russia needs to develop its domestic debt market, Yudayeva said. "We can issue Eurobonds, and I think the Finance Ministry reckons this would be simpler and cheaper. But Russia has a huge fundamental problem in the absence of a domestic debt market," she said.

It would be better to scale the domestic debt market up and use the funds borrowed there to cover the budget deficit than use the Reserve Fund's assets for this purpose, Yudayeva said. "I think it would be better to save the Reserve Fund's assets and increase domestic borrowing now that interest rates are coming down and the market situation is improving," she said.