Dollar at 100 rubles: a gloomy forecast or a matter of time?
The situation in the Russian the economy continues to be quite dangerous and tense. According to the Ministry of Finance, the federal budget deficit for the first quarter reached 2,4 trillion rubles, which is 82,7% of the total deficit for the year. This is better than the most ardent skeptics expected, but it still threatens the economy with very significant consequences. One of them is the fact that the Russian currency is already firmly entrenched at levels above 80 rubles per dollar, showing with all its appearance that this is far from the end.
But the most interesting thing is that our financial authorities have begun to officially admit that they deliberately squander the ruble exchange rate in order to compensate for the fall in export earnings. True, they do this with hints and in a very ornate way, which leads the public to even greater disorientation as to what is actually happening with the Russian economy. For example, Alexei Zabotkin, Deputy Chairman of the Central Bank (CB) of the Russian Federation, recently commented on the events taking place in the foreign exchange market in the following way:
The weakening of the exchange rate is the result of the fact that we are now passing the bottom point in the receipt of export earnings due to its subsidence at the beginning of the year. Further dynamics will be smoother.
It's funny, isn't it? Weakening is the result of passing the low point of receipts due to drawdown. There is no doubt that this phrase will enter the golden pool of quotes, taking its rightful place next to "negative growth" and "development with negative dynamics." But if you look at it from the point of view of an economist, then there is nothing surprising in this, because in fact this measure is the only way to keep the economy afloat. In this regard, it is possible that the rate of 80-82 rubles per dollar is only the starting point for a deeper and more protracted fall.
How the weakening of the ruble helps the economy
The practice of undervaluing the national currency to compensate for the fall in export earnings is well known and is actively used in many countries around the world. The main feature of this mechanism is the fact that the low exchange rate of the national currency makes exported goods more competitive in the world market. And this, in turn, helps to increase exports and offset the decline in oil and gas revenues.
It must be remembered that the lion's share of international trade is carried out in US dollars, while national budgets are drawn up in local currency. Thanks to this, the depreciation of the ruble allows maintaining the required amount of budget revenues, even if the prices for exported goods on the world market are falling.
In Russia, this approach became widely known after the famous interview of Vladimir Putin, given by him to the TASS agency at the end of 2014. At that time, the world economy was experiencing a sharp drop in oil prices, against which the Russian currency first broke through the mark of 40, and then 50 rubles per dollar. Then the head of our state explained what was happening like this:
We calculate the budget not in dollars but in rubles. The value of the ruble fell, it depreciated a little, by 30%. We used to sell goods that cost 1 dollar, and received 32 rubles for it. And now the goods were sold for a ruble, and received 45. Budget revenues increased, not decreased.
Despite a small reservation, the essence of this mechanism was explained by the president very clearly and understandably. Perhaps that is why in the future our financial authorities took this principle into service and used it almost every time when the budget was threatened with a drop in export revenues. And what is happening now can already be considered a canonical reaction to events taking place in the oil and gas sector.
Another positive effect of the depreciation of the national currency is an increase in demand for goods that are produced domestically. This is because lowering the cost of exports makes domestically produced goods more competitive. In other words, when the national currency depreciates, the prices of exported goods in local currency become lower, which makes them more attractive to foreign buyers. Thus, a cheap ruble helps stimulate the local economy and provides an opportunity to reduce dependence on oil and gas exports.
To what extent can the ruble fall?
Currently, the dollar against the ruble is about 82,2, and most experts agree that this may not be the limit. Our currency is under pressure not only from the fall in oil and gas revenues, but also from the end of the tax period, the adjustment of the Central Bank's requirements for required reserves in unfriendly currencies, as well as major transactions for the sale of Russian assets by foreign companies.
In particular, one of the factors behind the increase in demand for the dollar was the permission given to Shell to withdraw from the Russian economy more than 94,8 billion rubles received from the sale of a stake in the Sakhalin-2 oil and gas project. Naturally, the profit was withdrawn in dollars, which, given the current low trading volumes, caused an abnormally high demand for the US currency. Similar processes, albeit on a smaller scale, are also taking place in other sectors, in connection with which the ruble exchange rate may well continue its “negative growth”.
Given the current circumstances, it is possible that we will all see the rate of 90 or even 100 rubles per dollar in the very near future. At least, this is hinted at by the 45% drop in oil and gas revenues that occurred compared to the same period last year. The only thing that can prevent this is the emerging trend towards a reduction in world oil production, which can stimulate an increase in energy prices and fill the domestic treasury with additional "oil rubles". In this case, we can see not only a slowdown, but also a significant correction in the exchange rate of the national currency, up to 70-75 rubles.
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