Russian macro: Russia is detached
The Russian ruble has demonstrated a trajectory of extraordinary shape in recent months. With this in mind, a few questions arise, and one of them is about the long-term implications that the ruble’s very unusual trajectory might cause for the Russian economy. Some other factors that accompanied the recent volatility of the Russian ruble are also quite unique, such as the fact that the ruble appreciated in recent months against the USD just as the latter was growing stronger globally.
The question is not only where the ruble will move next, but also how the change that has taken place might have already affected the economy. Unfortunately, as Russia stopped publishing some of the previously available information, such as detailed monthly foreign trade statistics, or detailed budget execution numbers, such an analysis is not easy. Therefore, in addition to looking at the nominal exchange rate, it is worth considering the real ruble – against the USD, euro, or a basket of currencies.
The ruble’s real exchange rate fluctuations were much greater than usual in recent months as inflation accelerated not only in Russia, but also in many other countries, including the US and the eurozone, not to mention countries such as Turkey, where inflation skyrocketed. Hence the strong appreciation of the real effective ruble exchange rate, which returned to its December 2012 level and which is generally not good for the Russian economy, manufacturing in particular. What may somehow help is that Russia’s inflation may continue to slow down y-o-y as the country remains almost self-sufficient in food and has enough energy for domestic use. As inflation in many other countries is likely to remain elevated for some time, then Russia’s real effective exchange rate may start to depreciate again, thus opening more room for economic recovery, while the emphasis of the government's economic policy is seemingly shifting from building various pipelines (gas or oil) in all possible directions to developing other sectors of the economy (including manufacturing) and potential exports to other countries that have not yet qualified to join the club of “Russia-unfriendly” states.
Now read on...
Register to sample a report