Is there no end to devaluation?

The Bank of Russia raised the dollar to a historical high

What Russian economists, businessmen and ordinary citizens had been waiting for with gloomy pessimism has happened - the dollar-ruble exchange rate reached a historic high yesterday. After the Bank of Russia weakened the ruble against the bi-currency basket for the fourth time since the start of trading this year, dollar quotes increased by 2% - from 31.56 to 32.21 rubles. The previous record was 31.86 rubles. per dollar - was recorded on December 20, 2002. The euro also rose in price yesterday (by 1%) - from 41.97 to 42.38 rubles.

The pace at which the Central Bank is devaluing the ruble against major world currencies not only surprises analysts, but also gives some market participants cause for panic. They no longer rule out the strengthening of the dollar to the level of 40 rubles. this winter. There are no economic prerequisites for such a devaluation of the ruble yet, Vremya Novostey’s interlocutors note. In their opinion, in the coming weeks the Central Bank will stop weakening the ruble exchange rate against the bi-currency basket and will cease to actively influence exchange rate formation. By that time, the dollar will probably cost 35--37 rubles. provided that oil prices do not fall below $40 per barrel.

At a pre-New Year meeting with journalists, Central Bank Chairman Sergei Ignatiev and his first deputy Alexei Ulyukaev assured those gathered that there would be no sharp devaluation of the ruble either in the last working days of the outgoing year or in early January. The heads of the Bank of Russia formally kept their word: there was no immediate sharp weakening of the ruble; the process of depreciation of the national currency lasted for several days and, apparently, will continue for many more weeks. Since Sunday, January 11, the Central Bank has already devalued the ruble against the bi-currency basket four times, and during this time the dollar exchange rate has strengthened by 9.6%, the euro exchange rate by 2.3%. Yesterday, the value of the ruble again fell against the basket, this time by 50 kopecks, to the level of 36.8 rubles.

Back in December, Mr. Ulyukaev predicted that the average annual dollar exchange rate in Russia would be 30.8--31.8 rubles. with an oil price of $50 per barrel. The Ministry of Economic Development and the Ministry of Finance had the same forecast. Since oil is now trading at $40 per barrel, economists consider the current dollar exchange rate to be undervalued, which is the reason for the purchase of currency by both the population and enterprises.

The devaluation of the ruble at the beginning of the year was among the factors that forced the government to adjust the budget for 2009. Updated macroeconomic indicators will be presented in the coming days, as announced yesterday by Finance Minister Alexei Kudrin. It is expected that the average annual price forecast for Urals oil will be lowered from $50 per barrel to $32, forecast The dollar exchange rate may be increased to 34-35 rubles.

“At current oil prices, the equilibrium dollar exchange rate, according to our estimate, is 37 rubles,” says Renaissance Capital analyst Alexey Moiseev. -- In this case, Russia will not have a negative current account. In other words, income from exports and interest income from funds placed abroad will balance the costs of paying for imported goods and services and interest costs for servicing external debt. At the same time, there are still payments to be made for the main part of the external debt, which Russian companies and banks will actually have to pay at the expense of gold and foreign exchange reserves, that is, reserves will continue to decline.” Last year, the Central Bank allocated $50 billion to Vnesheconombank to refinance the external debts of Russian companies and, in addition, spent more than $100 billion to support the ruble exchange rate. As a result, over the past year as a whole, the volume of reserves, which increased in the first half of the year, decreased by 11% - from 478.7 to 427 billion dollars. From the maximum value of 598.1 billion dollars recorded on August 8 last year, reserves decreased by 171 billion dollars

As you know, supporters of a one-time devaluation of the ruble criticize the actions of the Central Bank, arguing that the regulator continues to waste billions of dollars to support the national currency. In the first days of trading, according to market participants, the Bank of Russia spent more than $10 billion. Yesterday, according to analysts, the same amount.

The newspaper's interlocutors believe that the current situation on the market will not last long. “Most likely, in January, the Central Bank will bring the quotes of American and European currencies to an acceptable level for itself, so that later it can intervene less actively in exchange rate formation,” believes the head of the Economic Expert Group, Yevsey Gurvich. Alexey Moiseev shares a similar opinion: “The devaluation of the ruble will not last long - another three to four weeks, by which time the dollar will cost 37 rubles, the bi-currency basket will cost 42.5 rubles.”

It is noteworthy that Alexey Ulyukaev said at the beginning of this year: “We consider it wrong to make forecasts of exchange rates... There is no need to target the exchange rate - this is a derivative of complex relationships in the economy. And to target the exchange rate, it is necessary to introduce capital controls. We are going to target inflation, not the exchange rate. Unfortunately, the population and business miss these explanations.”

The sooner the Central Bank establishes an equilibrium exchange rate for the ruble to the main currencies and stops devaluation, the better, Vremya Novostey’s interlocutors believe. “The main thing that devaluation threatens now is the flight of capital from all sectors of the economy. Investing in foreign currency assets abroad is now more profitable than investing in Russia, notes scientific director of the Higher School of Economics Evgeny Yasin. “In this sense, we need to find a balance point - a rate at which both business and the population will stop buying dollars.”

The devaluation of the ruble will have a positive effect on the economy, Mr. Gurvich believes: “After the Central Bank stops increasing the value of the bi-currency basket against the ruble, the demand for dollars and euros will decrease. The population and business will finally stop buying foreign currency and will invest their funds in the economy. Lending will increase accordingly. In addition, the budget will benefit – revenues from export duties and the mineral extraction tax on oil will increase.”

The director for macroeconomic research at the Higher School of Economics, Sergei Aleksashenko, sees the positive effect of devaluation in the fact that the weakening of the ruble will help eliminate the balance of payments deficit - this means that the Central Bank can retain part of its gold and foreign exchange reserves. Opportunities are also arising for manufacturers of Russian products.

The newspaper's interlocutors doubt that the weakening of the ruble will definitely benefit exporters. “Yes, export-oriented industries can continue to reduce costs in rubles, increasing profits, but, firstly, sales markets continue to shrink, and secondly, a significant share of the costs of many industries is made up of imported components, which in turn become more expensive,” notes Evgeny Yasin.

“The industry that can benefit most from devaluation is agriculture,” says Vladimir Tikhomirov, senior economist at Uralsib FC. -- The import component in the final product is less here than in other industries, so agricultural producers will have an advantage in the domestic market. In mechanical engineering, the imported component is significantly larger, but, for example, the automotive industry received a certain head start due to increased import duties. Heavy engineering depends to a greater extent on the state of industries - consumers of their products, and not on exchange rates. Exporters may benefit, but the positive effect will be largely eaten up by domestic inflation.”

An increase in import prices will also affect the well-being of citizens, predicts Evsei Gurvich, as it will lead to an increase in consumer inflation. According to his estimates, this year it will be 14% (currently the official forecast of the Ministry of Economic Development is 8.5%). Sergei Aleksashenko is also sure that citizens will suffer from the devaluation of the ruble; the worst thing is that everyone who took out loans in foreign currency and has ruble income - both companies and the population - simply “got caught.”

There are, however, also positive expectations. According to analysts at Renaissance Capital Investment Company, by the end of the year the dollar will cost 30 rubles in Russia. provided that oil prices increase from the current $45 to $80 per barrel.

Natalya ROMANOVA, Yulia MIRONOVA