Russia has devalued its currency, the rouble, for the third time this week and the seventh time this month. It takes it to its lowest value against the US dollar since January 2006.
The Russian currency has been hit by the price of oil, which is Russia's main export. Oil prices are more than 100 US dollars a barrel below their July peak.
The rouble is now more than 15% below its record levels against the US dollar, which were set at the beginning of August. According to Russian monetary authorities the Central bank has spent more than 100 billion US dollars defending its currency since the summer. It has opted to devalue gradually by widening the rouble's trading band, instead of making a single big devaluation. Arkadi Dvorkovich, economic advisor to the Kremlin revealed that Russia will experience next year its first budget deficit since 1998. "It's the worst of scenarios, if the fall in economic activity persists all year, deficit could jump to 5% of GDP", in an interview with Moscow's television news Vesti. If on the other hand the economy begins to recover in the second half of 2009, the "deficit could be equivalent to 3 or 4% of GDP", he added. However "this is no tragedy since the surpluses have been invested in Reserves Fund, precisely to counter situations as expected", said Dvorkovich. The economic advisor was quick to point out that Russia has sufficient reserves to address next year and 2010 budget deficits, if necessary. "With reserves totalling over 450 billion US dollars, government won't have to raise taxes", he added. Dvorkovich insited that there was no risk of a default as Russia underwent in 1998, when people's savings disappeared in a matter of days. "The situation is not simple or easy" but there's no need to "become hysterical" or appeal to radical measures. "In this crisis we can loose a few things: growth rate, production sector development, but it's all as planned. A crisis is a crisis, and we are prepared", underlined Dvorkovich.