Russia must learn to live within its much restricted finances or face an economic crash like that which wrecked the economy 18 years ago, Finance Minister Anton Siluanov said at the January 13 opening of the Gaidar Forum in Moscow. 

"Our task is to adapt our [2016] budget to the new realities," Siluanov said as he and other officials gave glum assessments on the back of plummeting prices for oil, Russia's main source of income. "If we don't do that, we will see a repeat of what happened in 1998-99," Interfax quoted him as saying, referring to the government default and economic crash that followed.

The Finance Ministry will draft and present amendments for the 2016 federal budget by the end of the first quarter, Siluanov said, as the cabinet prepares to cut the budget by at least 10% to cope with a deeper recession than expected.

With the government scouring areas for savings without touching military and other spending essential to its new self-assertive stance on the world stage, Siluanov said the country's budget could save up to RUB500bn ($6.5bn) if spending was cut by one tenth.

Before closing new contracts and taking on obligations all ministries will now audit their spending and postpone or cancel secondary priorities, he added.

On January 13, Kommersant daily reported that Deputy Prime Minister Igor Shuvalov will oversee  budget optimisation, with first suggestions expected as early as January 15.

Overall, the Gaidar Forum, first major economic forum in 2016, showed officials looking for a new "worst-case" consensus after projections of a $50-per-barrel oil price formed in late 2015 were already sharply surpassed in the new year.

The average price of oil budgeted at $50 for 2016 should be revised to $40 per barrel, Siluanov believes, not seeing any positive prospects on the oil market as it undergoes a "very rough rebalancing", with "no one planning to cut output".

Siluanov's deputy Dmitry Oreshkin estimated that at $40 oil, Russia's GDP could be around zero in 2016 compared with previous expectations of recovery to 0.1-0.5% growth.

Privatisations back on the table

Minister of Economic Development Alexei Ulyukayev does not see the main risk in oil prices dropping to $20 or $15 per barrel, but in a prolonged period of oil price stagnation, which "might last for years or decades".

Budget deficit planned at 3% of GDP in 2016 could reach 7-7.5% under a stress-scenario, said Ulyukayev, who used the Moscow event to promote privatisation of Russia's largest state banks VTB and Sberbank as additional sources of revenue.

Ulyukayev singled out the banking leaders as "very high quality assets" that "are attractive throughout the world", privatisation of which would fundamentally change the capitalisation crunch in Russia's banking sector as it weathers a recession and exclusion from foreign credits.