* Russia raises forecasts for oil price, GDP
* Higher budget revenues could mean less borrowing
* More rate cuts on the cards
By Toni Vorobyova and Dmitry Sergeyev
MOSCOW, Sept 1 (Reuters) - Russia's economy could return to pre-crisis levels as soon as 2012 thanks to higher than previously expected oil prices, but that does not mean there is scope for more state spending, officials said on Tuesday. Russia has been suffering since the second half of last year, when investors fled emerging markets, oil and commodity prices slumped, the rouble was devalued and the global credit crunch left companies struggling to refinance hefty debts.
But this summer has brought early signs the worst of Russia's first recession in a decade may be over, with officials touting a return to growth in month-on-month terms.
Finance Minister Alexei Kudrin said Russia had raised its
forecasts for the average Urals oil price to $57 a barrel this
year from $54 previously, and expects the price to increase
gradually to $60 by 2012
A government source told reporters that, as a result, the Economy Ministry now sees gross domestic product rising 1.6 percent in 2010, 3.0 percent in 2011 and 4.3 percent in 2012, compensating for the 8.5 percent GDP fall expected in 2009.
"In 2012 we will reach the pre-crisis level of GDP. Previously this was not so," the source said, adding this year's slowdown could be less deep than officially forecast, perhaps 8.2-8.3 percent. [ID:nLV587718]
"The external economic sphere has changed significantly thanks to the oil price, metals prices and higher volumes of gas exports and output ... Secondly, (the Economy Ministry) factored in a slightly more optimistic economic reaction on investment and on competitiveness in terms of import substitution."
The improved forecasts come after Russian Railways trimmed its expectations for the slump in rail freight -- seen as a key barometer for economic health. [ID:nL0145450].
Data on Tuesday showed Russian banks' assets and capital rose in July [ID:L1602469], while the manufacturing PMI hit an 11-month high in August. [ID:nLAG003694]
"The intensity of the decline is clearly easing, which could support further optimism regarding the prospects of quick economic recovery and fuel further optimism towards Russian markets," said Vladimir Osakovsky, analyst at Unicredit.
Even the revised Economy Ministry forecasts are still gloomier than analysts' consensus in a Reuters poll on Monday, which showed Russian GDP falling just 7.4 percent this year, followed by growth of 3.0 percent in 2010. [ECILT/RU]
Standard & Poor's on Tuesday forecast a contraction of 8
percent this year and growth of 2 percent in 2010, but said a
better diversification of the economy in the longer-term may
entail a weaker rouble
RATE CUTS EYED
Thanks to the brighter outlook on the economy, budget revenues should "change significantly," the source said.
"In these conditions, the deficit could turn out to be smaller than is now planned. Some (of the extra cash) will go on extra spending, and some on reducing borrowing."
Currently Russia is braced for a 2010 deficit of 7.5 percent of GDP, which will be partly funded by around $18 billion in foreign borrowing. [ID:nLR330292]
For his part, Kudrin said the brighter outlook on oil prices did not mean Russia could further increase government spending.
"That would involve a growing budget deficit and the use of reserves, which is comparable to printing money and could reignite the problem with inflation and rising interest rates, whereas we are now aiming for lower interest rates," he told reporters at an event to mark the new academic year.
"We have not yet come out of the crisis. We are just starting to come out of it," Kudrin added. [ID:nL1538097]
Russia's central bank has cut rates by a total of 225 basis points since April as it strives to encourage commercial lenders to offer more affordable loans to the recession-struck economy.
Analysts polled by Reuters see August consumer prices up just 0.2 percent, after a 0.6 percent increase in July. Lower inflation will enable the central bank to cut the refinancing rate to 10.50 percent this month from 10.75 percent. [ECILT/RU]
Russia's central bank does not pre-announce the dates of its rate decisions. First Deputy Chairman Alexei Ulyukayev said last week that the next move could come any day.