UPDATE 1-Russia says better positioned than peers to deal with U.S. policy impact

Fri Feb 21, 2014 4:50am EST

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MOSCOW, Feb 21 (Reuters) - Russia may see a balanced budget this year, which puts the country in a better position than other emerging markets to fend off the impact of the U.S. decision to curb its monetary stimulus, Finance Minister Anton Siluanov said on Friday.

Speaking to investors in Hong Kong, Siluanov said that the ministry had penned in a budget deficit of 0.5 percent of gross domestic product this year, but that its conservative fiscal policy may lead to balanced books.

"I think that this year we may see a deficit-free budget, while at the same time we see rather stable deficits in other emerging markets," Siluanov said, according to a transcript of his speech.

Siluanov is en route to Sydney for the meeting of finance ministers and central bank governors from the Group of 20 developed and developing nations.

Discussion over U.S. monetary policy will dominate the talks, with emerging nations wanting the Federal Reserve to calibrate its winding down of stimulus so as to mitigate the impact on their economies.

Developed members say troubles in the emerging world are mostly homegrown and domestic interest rates have to be set with domestic recoveries in mind..

Siluanov said a balanced budget puts Russia in a decent position to deal with global monetary policies changes.

"The Russian Federation, with its positive balance of payment and a virtually balanced budget, has less felt the changes that were caused by the winding down of the (U.S.) quantitative easing policy," Siluanov said.

He added that while the rouble had lost around 10 percent of its value since the beginning of, the currencies of the five most vulnerable emerging markets have lost on average 20 percent.

The rouble has lost nearly 8 percent against the dollar, according to Reuters estimates. Analysts at VTB Capital estimate that the rouble has been 2-3 percent undervalued relative to its EM peers since May of 2013, when talks about quantitative easing tapering began.

While some emerging markets have increased rates to stem their currencies' decline, Russia's central bank has kept interest rates unchanged this year and Siluanov said that this may continue.

"I believe that in the current situation, if we don't see some serious pressure on the rouble - which has been showing a growing tendency to weaken - the central bank will not introduce changes to its interest rates policy," Siluanov said. (Reporting by Daria Korsunksya and Lidia Kelly; Editing by Jon Boyle)

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