The strengthening of the ruble threatens the Russian economy with the "Dutch disease"

24 May 2022 18

The unprecedented flurry of sanctions brought down by the West on Russia demanded immediate decisive action to counter it. Over time, the countermeasures proved to be much more effective than the imposed restrictions. This led to some immediate positive results for economicswhich, however, in the medium term will lead to painful consequences for the economy, if again appropriate reforms are not carried out, designed to eliminate distortions.

One of these ambiguous and ambiguous consequences of the struggle with the West was the excessive strengthening of the ruble above the real liquidity threshold. The transition to paying for energy in the national currency led to an increase in the value of the ruble and the transition of the financial and economic system of the Russian Federation to a dangerous period when the entire complex of relations could be “infected” with the so-called Dutch disease. This macroeconomic malaise affects states with export distortions and rapid growth of the national currency.

This phenomenon, also known as the Groningen effect, is named after the city of the same name in the Netherlands, where a large hydrocarbon discovery in 1959 led to a sharp increase in energy revenues and a complete reduction in the production and export of all other types of goods and services. As a result, there was a boom in prices, a sharp reduction in jobs, a drop in income and, as a result, a large-scale crisis and unemployment, an unstoppable increase in the cost of all types of goods.

Russia is currently experiencing similar economic phenomena, characteristic of the first period of the "disease". The country's export earnings are increasing, while other sectors of the economy (especially high-tech) are stagnating. Now the effect of government measures is stunning, but in the near future it threatens with negative consequences and problems, for example, galloping inflation.

There is experience in overcoming the Groningen effect, since such turning points in history were once in such countries as Saudi Arabia, Nigeria, Mexico, etc. The main thing is not to rest on our laurels and not to unreasonably believe that any extremes are good. Now the leadership of the state should pay attention to stimulating the development of lagging industries and the economic sector, of technologies and exports in order to minimize the inexorably coming consequences of distortions in the structures of the economy.

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Bakht

+4

24 May 2022 09: 05

"Holland disease", in its purest form, does not threaten Russia. It is wrong to draw parallels, because there are completely different conditions.
1. Michael L.
  
  +2
  
  24 May 2022 09: 30
  
  The author's warning is not unfounded: if the disease does not threaten the Russian Federation "in its pure form", then this does not mean the impossibility of ailment in its "impure form"!
  1. Bakht
    
    +2
    
    24 May 2022 09: 35
    
    The discovery of a large hydrocarbon deposit in 1959 led to a sharp increase in energy revenues and a complete reduction in the production and export of all other types of goods and services.
    
    The export of goods to Russia has actually been stopped. Currency (dollars and euros) are practically not in demand. We are in the process of opening our factories.
    In "not pure form" the problem is created by an excess of the euro. But this problem can be easily combated by reducing the export of hydrocarbons. What is the West helping Russia with?
    1. Michael L.
      
      0
      
      24 May 2022 09: 47
      
      Yes: "There is a process of opening their own productions."
      But the problem of excess currency has not been eliminated.
      And the author's warning is not unfounded!
    2. Shmurzik
      
      0
      
      24 May 2022 10: 31
      
      The export of goods to Russia has actually been stopped. Currency (dollars and euros) are practically not in demand. We are in the process of opening our factories.
      
      Receipt in currencies with sluggish domestic demand for it - the impossibility of spending it abroad (limitation of exports to the Russian Federation, the impossibility of tourist trips, the transition to settlements in rubles) will in any case lead to a rise in the price of the ruble, which after a certain milestone will lead to glaring inflation and even more , but already the internal depreciation of the ruble, and this is a loss of confidence in him both inside and outside the country, and this is an imminent collapse of the ruble ...
      In addition, having no access to high-quality and expensive imports, you will have to be content with its cheap substitute, which will inevitably lead to the collapse of domestic export-oriented, and then domestic production ... The result is usually sad - unemployment, shortfall in taxes to the budget, problems with social benefits, budget execution, which is offset by the launch of a printing press with hyperinflation as a natural result ...
      1. Bakht
        
        +2
        
        24 May 2022 12: 16
        
        appreciation of the ruble, which after a certain milestone will lead to inflationary inflation
        
        It has always been argued that currency depreciation leads to inflation. For the first time I hear that the strengthening of the currency will lead to "galloping inflation."
        Further reading makes no sense.
        
        Shmurzik
        
        +2
        
        24 May 2022 20: 27
        
        It has always been argued that currency depreciation leads to inflation. For the first time I hear that the strengthening of the currency will lead to "galloping inflation."
        Further reading makes no sense.
        
        Have you already gone to the nearest market? Well, how ...- did something fall in price? Well, at least from import?
        Well, at worst from the local? ...Not?
        Matvienko has already spoken about local production about the lack of production of nails ... Do you think that cheaper (in light of the cheaper dollar against the ruble) in terms of rubles in China, nails are conducive to the organization of local production?...
        An expensive local currency always implies cheap imports, difficulties with exports and the development of local production, a lack of local currency, problems with filling and execution (in our case, the ruble) budget. Possible deflation at first glance is not bad (although the ideal of any economy is inflation of 2-3%, since deflation is economic stagnation at best)
        but, against the backdrop of upcoming delays in social payments, salaries, financing of state projects ... - it’s very bad ...
        Considering throwing from one extreme to another - a ban on the sale of currency to individuals, a racket with the mandatory sale of 80% of foreign exchange earnings to the state, and now the permission to sell currency and leaving 50% of the currency to the subjects only says that the authorities are poking around like a blind kitten.
        This suggests that the increased ruble expenses (spending on military operations, on payments to the military, the wounded, the families of the dead, on humanitarian aid in Ukrainian territories ...) require living rubles, of which there are none ...
        No, of course they are, but on hand and you can get them only by selling the currency collected in 2-3 months ... But, rubles are needed now, but the people
        Euro-bucks didn’t give up with closed borders, so the Central Bank is dumping.
        So keep your rose-colored glasses tight - it will shake in a steep peak!
        
        Bakht
        
        0
        
        24 May 2022 21: 12
        
        Here is the dumping of the Central Bank
        
        Are you sure that the Central Bank of Russia conducts foreign exchange interventions?
        
        Shmurzik
        
        +2
        
        24 May 2022 23: 44
        
        Are you sure that the Central Bank of Russia conducts foreign exchange interventions?
        
        Did I even say a word about interventions?
        Intervention is one of the ways to keep the course in some economically justified corridor.
        I wrote above that the state needs rubles to patch up gifts in the growing ruble spending ... There are two options, and both are bad:
        
        1.
        The launch of a printing press and the blockage of the country with money not backed by goods - hello from the 90s with all the consequences ...
        2.
        This is what is happening now ... The uncontrolled injection into the market of senselessly accumulated (continuing to come from hydrocarbon exports) foreign exchange funds, killing the export potential and stimulating imports and foreign producers, continuing to unreasonably strengthen the ruble and inflicting a blow to the breath of its own producer.
        There is a third option: - there are still at least some loopholes in foreign trade, to buy sanctioned products by any possible means, namely raw materials, means of production, components, equipment, reagents and the like, but not consumer goods and luxury goods, realizing all this in rubles. Yes, a return in rubles will have to wait a long time, and the money for the growing expenditure side of the budget is needed now. But, this reserve for the future is the only true way out. These are eternal liquids, which will not be available tomorrow, but oh, how they are needed. These are liquids that, unlike the same bucks, no one can freeze or confiscate.
        Today's choice in the form of one of two equally mediocre options is a bet on momentaryness - "After us, at least a flood!"
        It reminds me more of devouring seed wheat in anticipation of famine years...
        
        Bakht
        
        -1
        
        25 May 2022 11: 21
        
        If the Central Bank "dumping" means participating in foreign exchange trading. Is there such information?
        1. Starting the printing press is necessary. Aggregator M0 seems to be 12 trillion rubles. We need at least another 5-6 trillion rubles. And they need to be printed.
        2. Of course, you need to buy everything you need. But they don't sell for dollars and euros. And with other countries, trade goes for national currencies.
        3. Regarding the sanctions against GazPromBank. This will mean a complete cessation of trade with the EU. There will be no gas and oil. Examples: Bulgaria, Finland, Poland. The faucet closed. I'm all for it. And then no one will be interested in the dollar exchange rate at all. There are interesting resolutions of the Cabinet of Ministers and Nabiulina.
        4. And who forces you to buy currency? Mauser put to the head? If people need rubles and they are not enough, as you say (inflation, unemployment, etc.), then who buys the currency?
        
        Shmurzik
        
        +1
        
        25 May 2022 01: 00
        
        Are you sure that the Central Bank of Russia conducts foreign exchange interventions?
        
        I forgot to mention a small detail: Two senators, a Democrat and a Republican, are preparing a resolution imposing sanctions on all Russian banks. "GazPromBank" is one of them. The news was published in The Wall Street Journal on March 15th. Something tells me that these resolutions will be adopted, if they have not already been adopted. If this is the case, then the Central Bank has started a dirty game, dropping cheap currency to the ignorant people, rejoicing over the growing ruble and the dying bucks with the euro ...
        
        https://www.wsj.com/livecoverage/russia-ukraine-latest-news-2022-03-15/card/senators-to-introduce-resolution-to-sanction-all-russian-banks-kYFEUVGKi3W5CyPtZ52H
Blast

0

24 May 2022 10: 16

The refinancing rate of the Central Bank, oh, how there is room to reduce ... Also, VAT, we are still sitting high too ... So we would start with the "lagging" industries. The "disease" is man-made, and it is not so difficult to treat ... And the ban on the free circulation of currency should be replaced by the Tobin tax. Everything has long been invented before us. But this is not known to the accountant Nabiulina ...
1. Michael L.
  
  0
  
  24 May 2022 10: 29
  
  A small clarification: to the accountant Nabiullina.
2. Cherry
  
  0
  
  24 May 2022 14: 25
  
  She is not an accountant - everything is clear with these. She is a financier and uses the formula 2p * 4s - Floor Ceiling * 4 walls.
  1. k7k8
    
    0
    
    25 May 2022 12: 11
    
    Still, civilization does not stop in its development. In our time, the 3p rule was in effect - floor, finger, ceiling
Sergey Latyshev

+1

24 May 2022 10: 33

The brakes.
this effect has been playing with might and main since 2000, when the Americans began to drive the price of oil sharply upwards for their friends.
From 20 bucks under Yeltsin to 140 bucks in 14. When Medvedev ordered Boeings instead of TU and IL with might and main ...

And now that's it, just go to the store and compare prices ....
Jacques sekavar

+2

24 May 2022 10: 43

Distortions in the economy exist in any state formation of the world and are associated with the international division of labor and specialization - not a single state formation in the world is able to produce everything, therefore there is a need for cooperation with other producers of goods and raw materials.
The strengthening of national currencies affects exports, and energy resources will always be in demand for the foreseeable future, no matter what.
The most important thing for the Russian Federation is the stability of the national currency - fluctuations from 100 to 50 rubles for one US banknote should not be allowed.
The comment was deleted.
Expert_Analyst_Forecaster

0

25 May 2022 13: 40

What I understood long ago is that you cannot trust any economists, experts and other predictors.
They do not even lie, they are not always bought, but they always have arguments for completely opposite points of view. And what point of view they will defend here and now - even their left leg does not know.