June 29 (Bloomberg) -- Russian Prime Minister Vladimir Putin said it will take years for the government’s finances to recover from the worst economic slump in more than a decade and called for more spending cuts to limit future deficits.

Revenue will probably plummet to about 16 percent of gross domestic product through 2012, from between 23 percent and 24 percent in recent years, Putin said at a meeting with lawmakers yesterday, according to a transcript published on his Web site.

“It’s unlikely in the foreseeable future” that Russia will have the kind of windfall oil revenue it enjoyed before the crisis, Putin said. The government must therefore curb spending to hold down the deficit, contain inflation and safeguard its foreign-reserves, he said.

This year’s shortfall, the first since 1999, will reach about 8 percent of GDP, Putin said. Russia should seek to cut its annual deficit to 2 percent or 3 percent of GDP, he said. The gap widened to 511 billion rubles ($16.4 billion) through the end of May.

The economy of the world’s biggest energy producer shrank an annual 9.8 percent in the first quarter, the most in 15 years, and may contract 8 percent this year, the government estimates. The country’s industrial production declined at a record pace last month, sliding an annual 17.1 percent for the seventh consecutive decrease.

Stimulus Plan

The government has earmarked 2.51 billion rubles in stimulus spending to battle the slump, including funding designated for the car manufacturers, agriculture and construction. The “anti-crisis” program was signed by Putin on June 19.

“We see the statements as an indication that government’s ability to provide fiscal stimulus has become increasingly limited,” Vladimir Osakovsky, Moscow-based economist for UniCredit SpA, Italy’s largest bank, said in a report today. “The prospects of reduction of fiscal anti-crisis measures next year support our forecast for a continued weakness of Russian economic growth next year.”

Revenues from oil and natural gas exports last year were equivalent to 10 percent of GDP, Putin said. The price of Urals crude oil, Russia’s chief export earner, reached a record of $142.50 a barrel last July.

Spending on social needs, including pensions, the health- care system and benefits, will remain a priority even if the government proceeds with implementing budget cuts, Putin said.

Russia is likely to see a “subdued investment activity” if social outlays become a priority, Osakovsky said. The government’s program is “one of the very few driving forces of economic growth this year,” according to UniCredit.

Capital investment fell 23.1 percent in May, the biggest drop since December 1998.

To contact the reporter on this story: Paul Abelsky in Moscow at pabelsky@bloomberg.net.

Last Updated: June 29, 2009 07:33 EDT