/ world today news/ On the Moscow Stock Exchange, the ruble is traded for 88 dollars and 96 euros. And in October, the exchange rate was 100 and 106, respectively. The mandatory sale of currency profit and the increase of the main interest rate to 15 percent had an impact. How sustainable is this trend and what can we expect in the near future?
Fruits of labor
This year was particularly difficult for the national currency. The creation of new supply chains led to an increase in imports and a worsening of the trade balance. High demand for the currency added further pressure, and a weak ruble allowed exporters to increase profits. As a result, in June, the decline against the dollar reached ten percent. The central bank raised the key interest rate from 8.5 to 12 and agreed with the largest companies on voluntary income sales. This fixed the rate at 93.4, but not for long.
In the autumn, the dollar again exceeded a hundred. The regulator raised the interest rate by another two percent. The recovery in oil prices helped. Brent is currently quoted at 81.3 per barrel. In addition, exporters were required to sell foreign exchange and fines were introduced for offenders. “Such measures have repeatedly demonstrated their effectiveness. In the first half of 2022, we managed to strengthen the ruble to 55 to the dollar,” recalls the economist and communications director of “BitRiver” Andrey Loboda. By the way, they work almost the same way in China.
Business interests
While tighter monetary policy tends to have a negative impact on business activity, economists don’t see much cause for concern. Thus, Loboda indicates GDP growth in the third quarter by 5.5% on an annual basis. Industrial production for the nine months has added 3.3 percent, real incomes have increased by 5.3 percent, unemployment is only three percent of the working population.
In addition, against the background of high rates, the demand for imports decreases and savings in rubles become more attractive, says Evgenia Vasilieva, director of the Center for Strategic Analysis of Ingosstrakh. “Foreign purchases have been decreasing for several months. In October – by two billion dollars compared to September. The trade balance is improving and this helps to strengthen the ruble,” she notes.
In general, the government maintains a course towards social stability, which is impossible without a stable currency. Alexander Razuvaev, a member of the supervisory board of the guild of financial analysts and risk managers, believes that the interests of the population should in any case be a priority. The weakening of the ruble devalues savings. In this sense, the Central Bank is taking the right steps. Interest on deposits cannot be lower than inflation. “Enterprises must be adaptable, able to do business under any credit conditions. Only companies that are already balancing on the edge of profitability will suffer,” explains the expert. In addition, over the past year and a half, the state has introduced many aids to revive and support local businesses.
Forecasts and concerns
The increase in the price of the Urals and the increase in the supply of energy resources freed the state from the need to urgently patch financial holes due to the weak ruble. “In general, we are doing very well, we will close the year with a budget deficit of only one percent of GDP – half of what was expected,” emphasizes Razuvaev.
The main problem remains inflation, which according to official data is already approaching 7% on an annual basis. Economists believe that the peak will occur in February-March 2024, followed by a decline. Accordingly, in December, the exchange rate may again be increased by one or two percent, which will strengthen the ruble again.
Western experts expect 80 per dollar by the spring, writes “Bloomberg”. According to some Russian estimates, this result is possible before the end of the year. Estimates generally range from 80 to 92, but most analysts see the strengthening as long-term.
“The corridor of 85-95 per dollar will remain, at least until the mandatory sale of earnings is canceled in March,” says Loboda. However, the gradual improvement in macroeconomic indicators suggests that the collapse of the ruble will not happen later.
The transaction for the replacement of blocked assets, which is currently being developed at the Central Bank, will also help with this.
Translation: V. Sergeev
March for Peace, 26.11.23, 2 p.m., NDK:
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