Will the government agree to collapse the ruble? “No debts, no money.” Experts on the upcoming devaluation of the ruble Is it possible that the ruble will devalue in a year
Since the beginning of 2016, the ruble has already devalued by 12%. What to expect next from the ruble?
Oil price
The already alarming decline in oil prices introduces an imbalance in budget expenditures for 2016.
- With an oil price of $110, the budget received $95 minus $15, which went to oil companies. With a dollar exchange rate of 34 rubles, ruble revenues to the budget were equal to 3,230 rubles per barrel.
- With an oil price of $30, the budget minus the same $15 receives only $15. With an exchange rate of 77 rubles, this is already 3 times less - only 1155 rubles.
- To get the same amount in this product (oil price * dollar exchange rate), the Ministry of Finance needs to somehow increase one of the multipliers. It is clear that the price of oil is beyond the control of the Russian economic department. All that remains is the ruble exchange rate.
How much should a ruble cost?
This is where the Central Bank comes into play, which actually has the ability to devalue the national currency by arbitrarily large values, simply by increasing the money supply. From the level of 77 rubles, 107 rubles is 38%. Is the Central Bank ready for such a devaluation? - Hardly.
The fact is that devaluation directly affects inflation. According to the head of the department of long-term strategic planning of the Ministry of Finance of the Russian Federation, Vladimir Kolychev, 10% devaluation leads to 1.3% inflation. Based on this, 38% devaluation will give almost 5% additional inflation. Considering the Central Bank’s target for 2017 is 4%, it is unlikely that the agency will present such a “gift” to the Ministry of Finance, sacrificing itself. In addition, Anton Siluanov's department still has some opportunities to reduce costs.
18.08.2016 18:09
In the fall, experts predict a weakening of the national currency. Now the Central Bank of the Russian Federation is artificially covering the budget deficit with funds from the Reserve Fund, they believe, and the Central Bank is doing this for the sake of the rating of “United Russia” in the State Duma elections.
According to a number of Russian financial analysts, only the authorities' concern about the election result is keeping the ruble from falling. This opinion, in particular, was expressed in a conversation with Notes by Artem Genkin, Doctor of Economic Sciences, head of Consulting and Analytical Union LLC. “These concerns are justified, but there will most likely not be a discrete drop or a repeat of Black Tuesdays or Thursdays,” he says. “And I think that the drop will not exceed 10-15%.”
Exchange expert, member of the expert council of Business Russia Vladislav Zhukovsky believes that the potential for the ruble to fall is almost unlimited. “The current exchange rate of the ruble to the dollar is extremely low,” he believes. “It could start to fall now, but there is a powerful selective factor.” In his opinion, the peak of the ruble's fall will occur in November-December.
Chief researcher at the Institute of Economics of the Russian Academy of Sciences Nikita Krichevsky predicts the start of devaluation in September - immediately after the elections.
Many experts agree that the current exchange rate of the ruble at the level of 64-66 rubles per dollar is being artificially restrained by the authorities. The market exchange rate of the ruble may be lower than the current level not only because oil has long cost less than $50, they believe. The main risk factor is the depletion of Russia’s reserves in 2017, the likelihood of which is openly stated in the Russian government. This creates devaluation pressure on the ruble and creates negative expectations, which are already reflected in the growth of foreign currency deposits, even against the backdrop of extremely low rates on foreign currency deposits.
Therefore, today the main reason for holding the ruble exchange rate at the current level is image-related, analysts say. After all, if the ruble falls before the elections, no administrative resource will help United Russia get an acceptable minimum of votes. And until the end of the election race, the monetary authorities have to put a good face on a bad game. This is a typical situation before every election that took place in Russia during periods of economic recession.
“The only thing that the ruling party can present to Russians on the eve of the elections is the fight against inflation and the mythical strengthening of the ruble, despite the fact that the ruble exchange rate is overheated and investments in fixed assets are falling,” notes Vladislav Zhukovsky.
Nikita Isaev, director of the Institute of Contemporary Economics, also believes. “The current information agenda is, indeed, entirely determined by the upcoming elections to the State Duma,” he says. “If we allow the national currency to weaken now, this could damage the image of the party in power. Afterwards the ruble will be devalued. Most likely this will happen in October. Exactly because in the fourth quarter it will be necessary to set up the federal budget for 2017. In the meantime, savings from the Reserve Fund are being spent to cover the budget deficit, which keeps the ruble afloat.”
Most analysts agree that the dollar will rise to 70-80 rubles in the fall, but there are also more pessimistic forecasts.
For example, the head of the Center for Economic Research at the Institute of Globalization and Social Movements, Vasily Koltashov, predicts a weakening of the national currency to 90 rubles per dollar, and oil to 23-25 dollars per barrel against today’s 50 dollars.
Among the factors influencing the value of the ruble in the future, experts name not only the policies of the Russian government before the elections, but also the current price of oil, elections in the United States, which will determine the future financial policy of this country, and the economic situation in China.
The change in the value of the ruble against the dollar may also be affected by the state’s methods of combating the budget deficit and other internal economic factors.
“There is a seasonality factor, which always affects one way or another at the end of the third or beginning of the fourth quarter,” federal expert Artem Genkin tells Notes. — People return from vacation and begin to spend more money within the country, energy consumption increases, and prices for seasonal food rise. All this causes a certain weakening of the national currency, accelerates inflation and ultimately can stimulate the withdrawal of funds from the national currency unit, which is losing its value, into foreign currency assets.”
Another important factor in ruble fluctuations is the injection of money into Sevastopol and Crimea, the expert believes.
“One of the factors may be measures to create infrastructure and transport in the territory of Sevastopol and the Republic of Crimea,” he adds. “And this will also affect the country and will contribute to inflation and exchange rate changes throughout Russia.”
The problem of the fall of the ruble is the most discussed topic of the past year. Gradually decreasing in price, in the winter of 2018-2019. The Russian currency has reached a critical minimum. Experts attribute this situation to falling oil prices, pressure from Western sanctions, and the continuation of the conflict in Ukraine.
What happened to the ruble in 2019, and how can this change the lives of Russian citizens?
Read objective forecasts and expert opinions in this article.
Latest events in the foreign exchange market and the future of the ruble
The last months of 2015 were darkened by a sharp drop in the value of the Russian currency. 70 rubles seemed to be the maximum possible price for a dollar. Citizens expected that a gradual normalization of the situation in the foreign exchange market would begin in January, but the devaluation continued against the background of a decrease in oil prices.
When the price of a barrel of Brent “black gold” dropped below $30, very contradictory opinions began to appear regarding the ruble exchange rate:
- Some analysts said , that this means the collapse of the Russian currency and the entry of an economy based on hydrocarbon trade into a protracted crisis.
- Proponents of the opposite position They saw positive aspects in this: the Russian national economy, absorbed in stagnation, will quickly seek a way out of the situation, which lies in the development of manufacturing industries.
One way or another, the devaluation of the ruble continues to remain relevant, and its negative impact on the economy is quite obvious. Budget deficit, closure of enterprises, inflation, decline in the level of well-being of citizens.
The future of the Russian currency in such a situation is quite difficult to predetermine - released into free float, it is dependent on, which is tied to oil.
In this regard, regarding forecasts for changes in the exchange rate of the Russian currency, we can talk about the formation of two points of view:
- In 2016, the price of the dollar will fluctuate between 75-80 rubles , since this is an objectively justified rate given the officially established inflation rate of 6.5-7%. If this indicator is exceeded, the Bank of Russia will resort to intervention.
- This year the dollar will drop to 67-68, and by the beginning of 2017 to 65 rubles . The reasons for this trend will be the growth of oil prices, the gradual lifting of sanctions and the slow activation of manufacturing industries.
Some Western experts note that the devaluation of the ruble will lead to a huge budget deficit . To prevent this, a fair exchange rate for the dollar should be 210 rubles.
Initially, the Russian budget was based on an oil price of $50 per barrel. However, at the beginning of the year it was revised to a target value of $25. At the same time, neither the Ministry of Economic Development nor the Central Bank of the Russian Federation is promising any global drop in the ruble.
Should Russians start preparing for the worst?
Such a statement is somewhat biased. There is no need to prepare for the worst - the ruble has already reached its lowest possible level and the Bank of Russia simply will not allow it to fall further. However, it is not advisable to expect a rosy future from an economy that is in a state of stagnation.
It is worth highlighting several key trends that will affect Russians amid the depreciation of the ruble in 2016:
1. Prices for goods are the most painful issue . According to forecasts, a significant increase in the price of goods is not expected. Inflation is set at 6.4% (with a pessimistic scenario of 7%). The antimonopoly service will control speculation in the commodity market. Only equipment, most of which is imported and traded in dollars, will increase in price significantly.
2. Housing and communal services tariffs – differentiated approach . Russians' concerns about rising prices for water, electricity and gas are not justified. The increase in price will be associated only with indexation and will range from 3 to 6.5%, depending on the region (the maximum percentage is provided in Moscow and St. Petersburg). Electricity tariffs are planned to be distributed on a progressive scale: the higher the consumption, the higher the cost.
3. Social payments - indexation in conditions of deficit . The Russian budget deficit in 2016 is inevitable. However, even in these conditions, a decision was made to increase pensions, benefits, and scholarships for students by 4%. Maternity capital will remain unchanged.
4. Mortgage loans - unfounded fears . In March .
Citizens’ fears that banks will immediately raise interest rates to unattainable levels are unfounded:
- Firstly , excessively high interest rates are not available to banks due to significant competition in this segment.
- Secondly , a slight increase in mortgage prices (up to 14-15%) will lead to a drop in demand for housing, which in turn will significantly reduce the price per square meter of area.
The general conclusion about the state of the Russian economy is: no deepening of the crisis is expected , although unemployment and prices are expected to rise. Stagnation will remain within the same boundaries. By the end of the year, some recovery is expected against the backdrop of the development of import-substituting industries. If sanctions are lifted, stabilization will begin a little earlier.
What do the experts say?
Bogdan Zvarich, analyst at IH FINAM:
“The first half of the year promises to be extremely difficult. During this period, the dollar may consolidate at a position of 80-85 rubles due to low oil price quotes. However, in mid-2016, the situation on the hydrocarbon market is expected to improve and the cost of oil will increase. By the end of the year, the dollar will return to the position of 60 rubles, inflation will be 7%, and GDP growth will be 0.2-0.5%.”
Dmitry Kipa, head of the analytics department at QB Finance:
“The situation of low oil prices, which provokes the devaluation of the ruble, will not last forever. Some OPEC countries will not be able to withstand production conditions at a price below cost, and they will begin to raise rates, saving their budgets. In this situation, the maximum value of the dollar will be 80 rubles, and inflation will be 15-17%.”
Dmitry Zhuravlev, director of the Institute of Regional Problems:
“Macroeconomic indicators will increase in 2016, but the living standards of citizens will decrease. But neither one nor the other will be distinguished by high performance. The price of oil will remain low, not helping to improve the situation. This requires real diversification of the economy.”
A significant fall in the ruble is not expected in 2016, but the national economy will continue to remain in a state of deep stagnation, which will negatively affect citizens’ incomes and their well-being. However, experts predict the peak of the crisis in the first half of the year, and in the summer the situation will begin to change for the better. .
The current exchange rate of the Russian ruble is confusing. A few years earlier, no one could even think that the Russian currency was capable of such a protracted and rapid decline. Will there be a further devaluation of the Russian ruble in 2016 – this is the dilemma for the majority of residents of the Russian Federation.
Opinion of the Central Bank of the Russian Federation
The Central Bank of the Russian Federation believes that today the dollar exchange rate in the Russian Federation is at its fundamentally justified level. According to Elvira Nabiullina, in the future the situation will be more stable, since the value of the ruble has already reached equilibrium with the US dollar. But the further dynamics of the Russian currency will continue to be influenced by external factors. Therefore, a devaluation of the Russian ruble this year is not excluded.
The ruble is no longer falling - it’s the dollar that is rising in price
Currently, the oil market has reached its minimum levels. , hydrocarbon quotes have already passed the critical point. And if a new wave of decline in oil prices is possible, then it will be short-term speculative jumps in prices, which will not affect the Russian economy in any way. Thus, the price of oil is gradually leaving the list of destabilizing factors.
However, there are still several serious circumstances that will constantly put pressure on the Russian currency - interest rates and the slowdown of the Chinese economy.
According to the words of the first deputy chairman of the Central Bank, S. Shvetsov, the US Federal Reserve System is set to further tighten its own monetary policy by the end of this year, as a result of which the global value of the dollar will continue to grow. And currently, market participants are actively factoring future increases in Fed interest rates into the value of the dollar. The dollar continues to strengthen and, accordingly, the position of the ruble against its North American competitor is weakening.
Also, according to Moody’s analysts, the Chinese economy, which is the largest consumer of raw materials in the world, is of serious concern. The world's second largest economy continues to slow down, which will continue to restrain prices for hydrocarbons and metals. This means that the cost of oil, on which the Russian economy is so dependent, will not be able to rise, which, with a budget deficit, will lead to a new increase in inflation and devaluation of the Russian ruble.
The forecast for the Russian ruble exchange rate for 2016, according to the head of the Ministry of Economic Development Ulyukaev, is a weakening to 90-100 rubles per dollar. The fact is that in the medium term, the price of oil will continue to fluctuate around 30-40 dollars a barrel. This means that the oil-dependent economy of the Russian Federation will lack drivers for growth, and GDP growth will continue to decline. In such conditions, the ruble no longer has any support.
This position is confirmed by Danske Bank analysts, who predict that the Russian economy will fall by another 6.2% this year. And this is almost 2 times higher than government forecasts (3.3%). In turn, experts from Vnesheconombank say that the Russian GDP will decrease by 4.7%. And economic growth will begin to resume no earlier than 2017, and this only if the oil market recovers. Whereas a further drop in the price of hydrocarbons will reduce the performance of the Russian economy by another 3%.
And let’s not discount another factor that is destabilizing the financial system of the Russian Federation - panic, which became one of the key factors in the devaluation of the ruble at the end of the year. With significant fluctuations in the dollar, the population began to convert their savings into dollars, which added even more fuel to the fire and provoked an even greater devaluation of the Russian ruble.
However, in the current conditions, when the incomes of the population of the Russian Federation have fallen significantly, and there are no more free funds left for currency speculation, Morgan Stanley analysts predict that the average USD exchange rate in 2016 will be 73 rubles/dollar. But, only if one of the reducing factors described above does not get worse.
Last year, before the New Year, all Russians received a surprise. The ruble exchange rate collapsed in a matter of days compared to the dollar and euro. And the ruble never returned to its pre-crisis levels. This was a full-fledged and very significant and painful devaluation of the ruble.
Can we expect this scenario to happen again in the future? What are the prospects for the ruble in 2016? What do analysts and experts think about this?
WILL THERE BE A DEVALUATION OF THE RUBLE IN 2016 IN RUSSIA LATEST NEWS
Some analysts believe that the devaluation of the ruble has not yet ended and that it is quite possible that it could come again in 2016. In particular, Goldman Sachs bank says that if oil prices fall, the ruble may fall even below its current low values. They even mention specific figures of 100-120 rubles per dollar and, accordingly, a slightly more expensive euro. Also, several months ago, the press published information about stress tests for banks from the Central Bank, which calculated the possible development of events if the dollar costs exactly that much. Then denials appeared in the press. But there is no smoke without fire, right?
Another source, the famous economist Vladislav Zhukovsky, says that the ruble exchange rate may collapse to the level of 75-85 rubles per dollar in the near future. Exact dates are not announced. But we were talking specifically about 2016. By the way, these forecasts almost came true when in the fall of 2015 the ruble again showed negative dynamics against the dollar and the euro.
Economists from Alfabank say that the ruble is now close to its fundamental values, so they do not expect any second wave of devaluation in 2016. According to experts, most likely the ruble exchange rate will be at the level of 60-67 rubles compared to the dollar.
Currently, I personally keep all my savings in rubles and do not plan to convert them into foreign currency. And the point is not that devaluation cannot happen in the future. It's just a game of roulette. In theory, of course, the ruble may still weaken against foreign currencies. But in practice, the ruble may strengthen. Plus, you always lose when there is currency speculation in the spread (unfavorable rates of banks for buying and selling currencies). In addition, it is better to earn money, and not worry yourself with questions about what currency to store it in. Plus, no one has canceled the good old rule. Don't put all your eggs in one basket. If there are any doubts, then it is better to take your savings into ruble and foreign currency deposits (I advise you to pay attention only to reliable banks), and also do not forget about investing in real estate, if there is a sufficient amount of available funds.
