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Experts warn of high risks of ruble’s devaluation over midterm

October 24, 2016, 18:13 UTC+3 MOSCOW

The reason is the potential price decline due to persisting supply-demand imbalance on the global market

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© Anton Vergun/TASS

MOSCOW, October 24. /TASS/. The risks of the ruble’s devaluation over the medium term are still high, despite the strengthening of Russia’s national currency over nine months of this year, according to the economic monitoring prepared by the Russian Presidential Academy of National Economy and Public Administration and the Russian Academy for Foreign Trade.

"Despite the strengthening of the ruble in January-September 2016, the risks of its weakening over the medium term are still high. The reason is the potential price decline due to persisting supply-demand imbalance on the global market, which may be exacerbated due to economic slowdown in China as well as the toughening of the US Federal Reserve’s monetary policy, which will raise the attractiveness of the US assets by triggering capital outflow from other developed and developing markets, including from Russia," the report said.

According to experts from the Russian Presidential Academy of National Economy and Public Administration and the Russian Academy for Foreign Trade, the nominal exchange rate of the dollar versus the ruble dropped by 13.3% in January-September 2016 from 72.9 to 63.2 rubles per dollar due to the growth of energy prices in the second and third quarter compared with the first quarter, and the reduction of capital outflow.

"In the second half of January this year, the dollar exchange rate exceeded 80 rubles on stock trading. As a result of inflation stabilization and strengthening of the ruble in nominal terms the ruble’s real effective exchange rate in January-September 2016 grew by 9.6% versus December 2015, which is in line with the level of the beginning of 2006," the monitoring said.

Meanwhile, Russia’s Central Bank Chief Elvira Nabiullina said earlier this month that the regulator did not expect the ruble’s devaluation.

The ruble’s devaluation began in the second half of 2014 as it dropped 2.2-fold versus the dollar in June-December. However, starting February 2015, the ruble reversed to growth and rose by 30% versus the dollar by May 2015. In May 2015, the US currency reversed to growth. The dollar’s exchange rate has risen from 49 to 62.5 rubles since mid-May 2015.

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