Russia to lose 200 bln USD as economic shocks seep in

External shocks, including plunging oil prices, would cost the Russian economy 200 billion U.S. dollars, Finance Minister Anton Siluanov said Wednesday, warning that two sovereign wealth funds would be exhausted within the next two years if budget expenditures remain unchanged.

"The effect of external shocks to Russia's current account balance will amount to approximately 200 billion dollars," Siluanov told a meeting in the Federation Council, the upper house of the Parliament, citing falling oil prices as the main reason. Currently, oil prices dipped below the 50-dollar level.

Stressing the drop will continue in the long term, Siluanov said that there would be no swift bounce of oil price as it used to be in 2008-2009 and it was "unlikely" for oil prices to return to 100 dollars in the foreseeable future.

The minister said the low oil price would add more pressure on ruble exchange rate and consumer inflation, which Siluanov estimated would reach an annual rate of 12.5 percent in January. The official forecast for inflation in 2015 stood at 7.5 percent.

"Our economy needs to be adapted to new conditions in domestic demand," Siluanov said, adding that the country needed to decrease its budget spending to tame inflation.

He also warned that Russia's two sovereign wealth funds, the National Wealth Fund and the Reserve Fund, would be exhausted in the next 1.5 years to two years if budget expenditures remain unchanged.

"One of our main tasks at the moment is to preserve these reserves, to preserve the financial stability of the state that was created in recent years," Siluanov stressed.

In the face of tough reality, the government in the following years had to review budget investment expenditures and postpone new construction projects in 2015, Siluanov said.

He suggested that all major construction projects scheduled for completion in 2015 should receive full financing, while finance planning for future projects would be reviewed and most likely cut by half.

The Russian government on Wednesday published a 38-page anti- crisis austerity plan, which was designed to ensure economic development and social stability amid unfavorable economic conditions.

The plan envisaged a 10-percent cut of the 2015 budget and more reduction to be proposed later by at least 5 percent annually in the next three years.