Depreciation of the ruble (2014). The reason for the fall of the ruble

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:46

The Russian economy is overcoming another round of difficulties, one of which is the depreciation of the national currency against the dollar. What is the reason for the depreciation of the ruble? What is it - a systemic phenomenon or a speculative effect? What will be the consequences for ordinary citizens and businesses?

Pessimistic outlook

According to some analysts, the value of the US dollar by the end of 2014 may rise to 37-40 rubles (or it will be the average annual rate of the American currency). The main reason for the weakening of the Russian banknote is the deterioration of the national economy. Experts who support such a pessimistic forecast also believe that the already low dynamics of GDP will continue to decline, and capital will flow out of the country.

Positions of the ruble, according to pessimistic analysts, will weaken not only against the dollar, but also against other major world currencies. There is also a point of view that the Russian economy is now experiencing a period of stable devaluation of the ruble, due to the deterioration of the balance of payments. The deterioration of the positions of the Russian currency, according to analysts, may be facilitated by politicsThe US Federal Reserve System, which during 2014 may continue to reduce measures of monetary impact on the economy, and in 2015 start raising the refinancing rate.

Opinion of traders

Professionals in the field of foreign exchange operations believe that the position of the ruble against the dollar is no worse than that of other currencies. Market pressure, according to traders, was also experienced by the Australian dollar, the Argentine peso, as well as the national currency of Turkey - the lira. All of them, like the ruble, are the so-called "raw" money. At the end of 2014, the dollar, according to trade experts, may cost 34-35 rubles, the euro - about 45-46 units of the Russian currency. During the year, however, exchange rates may fluctuate.

The main reason for the fall of the ruble, traders believe, is the global reorientation of investment flows - capital is withdrawn from emerging markets, to which Russia belongs, and invested in the economies of developed countries. This trend may continue in the coming years. At the same time, the weakening of the national currency of the Russian Federation, as financial experts believe, can be strongly felt by citizens: there is a high probability of an increase in consumer prices.

Opinion from the scientific community

Some experts among economists believe that the fall of the ruble in 2014 will be protracted. As a result, the decision of the Central Bank to minimize the regulation of the foreign exchange market may be revised. However, as soon as the ruble stabilizes, the Central Bank may once again loosen control overbidding. Much in the national monetary policy, according to experts, depends on the correct interpretation and understanding of economic growth. For example, according to scientists, there is no reason to talk about the growth of the real economy on the example of developed countries, since the labor force is too expensive there.

Artificial growth through the accumulation of equity investments is, according to some experts, a “soap bubble” that will burst over time. However, for Russia, according to scientists, economic growth can be quite tangible, and it is the weakening of the currency that is the real factor in stimulating it. When the ruble falls, exports increase, while investors increase profits (although market confidence may also decrease).

Optimistic scenario

Despite the abundance of negative scenarios regarding the exchange rate of the ruble against the dollar and its impact on the Russian economy, there is a quite optimistic view of the state of affairs among economists. There is a version that in 2014 the eurozone, which is the main foreign trade partner of the Russian Federation, will get rid of some of the crisis phenomena characteristic of past years. The economies of countries where the official currency is the euro may grow by more than 1% in 2014.

This may lead to an increase in Russian exports of raw materials, as well as an increase in the price of it. If this happens, the trade balance of the Russian Federation will also grow, and after it the outflow of foreign capital will slow down. As a result, the exchange rate of the ruble against the dollar will also receive support. According to such an optimistic scenario, Russia's GDP growth following the results of2014 may exceed 2.5%, and the dollar exchange rate will not exceed 33 rubles. Thus, a forecast is given when the fall of the ruble will end: within 2014.

Retrospective

Among economists there is a point of view that the depreciation of the ruble against the world's leading currencies is not a new phenomenon and is absolutely natural for the Russian economy. Even if we do not take into account the crisis of 1998, when the national banknote of the Russian Federation fell several times against the dollar, it is enough to recall the economic recession in 2008-2009. Then the Russian currency has undergone no less strong devaluation than in 2014. However, as further developments showed, the ruble in the next few years confidently won back the positions of the dollar and the euro.

You can also remember the currency trading in the fall of 2012 - then the exchange rate was characterized by very high volatility, many experts predicted the imminent fall of the ruble, but this did not happen then. Today, the Russian currency has fallen in value, but this, based on the experience of past years, may not give rise to drawing far-reaching conclusions on the further development of the national economy. In 2008-2009, there were specific reasons for the fall of the ruble in the economy. 2014 may reveal other factors affecting the exchange rate of the Russian currency.

Trends in developing countries

There is an opinion among economists that the ruble behaves in currency trading in much the same way as the banknotes of other developing countries, primarily the BRICS states (which include Brazil, India, the Russian Federation, China and sometimesSOUTH AFRICA). The fact is that now there is a global outflow of investments of foreign investors from these economies. National currencies are weakening, as there is a good reason for the fall - the ruble, real, yuan or rand does not matter - a factor common to the countries of the entire group. Russia, thus, also loses its attractiveness for foreign capital.

The outflow of investments is also due to the fact that the US Federal Reserve is gradually tightening its monetary policy, reducing the issuance of unsecured dollars and increasing domestic lending rates. Following the example of the world's leading economy, other developed countries are also tightening their belts. Investors, seeing this trend, are imbued with greater confidence in these markets and prefer to direct capital there, rather than in developing countries. Economists also note that the currencies of the BRICS countries are not so much weakening as the dollar is strengthening due to the improvement in the US market.

Internal causes of ruble weakening

The depreciation of the ruble, as some experts believe, is caused not by external, but by internal reasons. Firstly, due to the active revocation of licenses from private banks by the Central Bank of Russia - in 2013 this procedure was carried out in relation to 20 financial institutions. The most resonant precedent is the closure of Master Bank, one of the largest in the country. Secondly, the Bank of Russia has decided to gradually let the ruble float freely.

The reason for this is the desire to stimulate the development of the country's industry, which is not easy to maintainexport profitability. A "weak" ruble can significantly reduce the cost of Russian goods and make domestic production more competitive. Some economists believe that the depreciation of the national currency of the Russian Federation is beneficial to the authorities: government bonds are borrowed in rubles, and oil revenues are calculated in dollars. With the growth of the dollar, the state will receive more national currency to pay interest on bonds.

Consequences of ruble weakening

What threatens the fall of the ruble? Despite the fact that the weakening of the currency is primarily a macroeconomic indicator, the consequences of this phenomenon can also be felt by ordinary citizens. According to some experts, the depreciation of the national Russian currency may lead to an increase in prices for imported goods (especially for electronics, cars, medicines, clothing, as well as manufactured goods, the raw materials for which are purchased abroad).

The rise in prices in these segments, as analysts have calculated, can reach 15%. In addition, the cost of holidays for Russians abroad (especially in developed countries) will rise. Prices for air tickets and hotels are mostly expressed in dollars, and their nominal value, despite currency fluctuations, remains unchanged, which means that the actual value of tourist expenses when converted into Russian currency increases. Citizens, therefore, cannot be indifferent to such a phenomenon as the fall of the ruble. What will the further weakening of the national banknote of the Russian Federation, economists explainpretty intelligible.

Fed Factor

As noted above, there is a theory according to which the exchange rate of the ruble against the dollar directly depends on the policy of the US Federal Reserve System. The financial institution is now cutting back on what it calls a "softening" program, when the printing press issued unsecured dollars. The Fed is reducing purchases of bonds and mortgage contracts. New Fed guidance promises flexibility in handling the program. This financial organization has certain changes in its relationship with the authorities. If years earlier the Fed had to convince Congress of the need to raise the public debt ceiling, now it does not make sense - the US Parliament has the right to change the ceiling at any time. This circumstance, economists believe, helps to reduce the risks of the US economy from the actions of the Federal Reserve System. Thus, the US market has a good chance of stabilizing and, as a result, the strengthening of the dollar in international currency trading.

Pros and cons of ruble weakening

The depreciation of the ruble is a phenomenon that does not always have a negative effect on the economy. There are pros and cons to this phenomenon. Among the indisputable advantages is an increase in the income of exporting companies and, as a result, an increase in tax payments to the Russian budget. Import substitution is stimulated - the price of foreign goods increases, and it becomes more profitable to buy domestic products. This contributes to economic growth. In turn, in order to understand what threatens the fall in the exchange rateruble, it is worth remembering what a country's external debt is. This is money that residents borrow from abroad – usually in dollars. Therefore, the main disadvantage of the weakening of the Russian currency is the increased burden on such borrowers. Russia's foreign debt now stands at hundreds of billions of dollars (according to some experts, it has already exceeded the country's international reserves). A prolonged and significant weakening of the ruble becomes unprofitable for companies (especially commercial banks) that owe foreign creditors.

Bank forecasts

The largest Russian and foreign banks are also trying to assess the fall of the ruble and predict further dynamics of the national currency of the Russian Federation. It should be noted that credit institutions are generally optimistic. Banks such as VTB Capital, Morgan Stanley, and Alfa Bank expect the dollar to be worth 35 rubles by the end of 2014. Citi, Otkritie, Uralsib see the ruble significantly stronger: the publications of these institutions featured figures between 32.3 and 34.5 units of Russian currency per US banknote by the end of the year. The forecast for the ruble exchange rate from HSBC (35.4 per dollar), Renaissance (35.5) looks somewhat more pessimistic. UBS sees the greatest weakening of the Russian currency (36, 5). It is worth noting that there is also a significant difference between the forecasts of banks regarding the ruble exchange rate against another major world currency - the euro - from 43.4 (Morgan Stanley) to 48.4 units of the Russian banknote per euro (Citi).