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Thursday, October 27, 2016

The government limits the ruble: currency scared of Putin

The attack on the rouble continues after Putin asked Medvedev to think about this issue, presidential aide Andrei Belousov today at the Forum for strategic initiatives called the strengthening of the national currency “work in the negative.” Meanwhile, normal people call the strong ruble “problem” can not.

photo: Alex geldings

Mr. Belousov said that “perioralny” ruble means a reduction of budget revenues, “working against exports and hinders the competitiveness of the Russian economy.

In General, this week the authorities how the team performed against a strong national currency and even began to develop special measures to curb the “wood”. The ruble was frightened: after a long consolidation during the day he fell against the dollar to 32 cents, and Euro — 60.

Strictly speaking, a normal person to call the strengthening of the ruble issue of the economy can not. Because it low inflation, rising purchasing power, availability of loans, revival of production. Yes, in the end just another opportunity to go abroad for vacation. What’s wrong with that? There is no strong economy with weak currency.

However, the situation with the growing ruble has so strained the power that, again, was the subject of the recent meeting with Vladimir Putin. According to the results the government were given certain instructions “to stabilize the financial situation.”

We will remind, since mid-June, the ruble is slowly but surely strengthening. It came down to that for the Euro this week gave less than 70 rubles, and the dollar is about 63.

And at this time the oil is, strangely enough, were cheaper. Not too much, but still — with $52 per barrel in mid-June, she’s now “given up” to $46-47. There were days when quotes broke $46 and reached almost $45.

Now even schoolchildren know that the rate of our national currency depends largely on world prices for “black gold”. And this dependence is once again confirmed in the 2016 budget. It is calculated from the average cost of oil at $50 per barrel and the average annual rate of 67 rubles per dollar. And at these rates the Federal budget deficit should not exceed 3% of GDP, or 2.1 trillion rubles.

However, in the first half of the average cost of Urals oil (it mainly is exported and put in the budget) did not exceed $38. The result is a semi-annual deficit exceeding 4% of GDP, and in April even 8%.

That’s why it “suddenly” started officials. In such circumstances, the government, which the President has strictly ordered to keep the gap between revenues and expenditures not more than 2.1 trillion rubles for the year, the best two things, primarily.

First, the rise in oil prices, which many experts have recently predicted to $60 a barrel before the end of this year. Second: quite low exchange rate. For example, in the range of 65-70 rubles for “green”. And now, after exchanging dollars for rubles is much less than necessary, the Ministry of Finance. The budget deficit is repaid from virtually a single source of the Reserve Fund.

Dissatisfied with this trend and Russian manufacturers. Their sales even in the domestic market are reduced as a result of competition with imported goods. Many of them complained about it to Putin.

So why the ruble is so widespread, despite cheap oil?

Some experts attribute this to the games in the Kremlin ahead of parliamentary elections. After all, at stake is the loyalty of voters. These forecasters, including the way of economic development, I believe that in August-September growth in consumer prices to a complete stop. And then you can give the ruble a serious fall.

But while the Central Bank supposedly was overkill with the support of the national currency. Although there continues to emphasize its non-interference in the exchange rate on the stock exchange. They say, market regulation, the regulator carries out through other tools: interest rates, reserve requirements, additional requirements to banks.

Maybe the ruble strengthened due to the fact that Russia is gradually recovering from the crisis, stop the outflow of capital and foreign investment back? And officials just don’t stand in the way. But in this rosy version does not believe.


Irina Rogova analyst GC Forex Club:

Fears of the government justified, given the export orientation of the domestic economy. However, for ordinary people “high material budget feasibility” is not clear. After the decline of the dollar and the Euro carries several obvious advantages.

Since the beginning of the year, the ruble rose against the dollar in the region of 20%, which made the cost of trips abroad in rubles cheaper. In addition, some goods (shoes, clothes, small and large household appliances) imported. Therefore, we can assume that their prices will fall. Finally, a slight relief to feel those who have loans in foreign currency. In General, a strong ruble will have a positive impact on the situation with real incomes, which directly depend on the inflation and growth of nominal wages.

Read the story of Nicholas Warble “to Buy currency as soon as it will start to go up”

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