An exercise with many unknowns - Newspaper Kommersant No. 177 (7378) of 09/26/2022

An exercise with many unknowns - Newspaper Kommersant No. 177 (7378) of 09/26/2022



The Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF) calculated a macroeconomic assessment of various monetary policy regimes for the medium-term dynamics of the ruble exchange rate, price stability and the survival of net exporting industries. Due to the overvaluation of the exchange rate, the most vulnerable now are the extraction of oil and gas, other minerals, wood processing, the forestry sector, part of the light industry and the sector of other transport and equipment. In the long term and with the given risk parameters, analysts do not see a noticeable change in the ruble exchange rate.

At the beginning of the study, which focuses mainly on the ruble exchange rate at the end of 2022 and later, the authors of the CMASF study cite three groups of countries grouped by the degree of strength of national currencies and their impact on welfare, economic and investment activity. In general, the more the national currency is overvalued, the greater the share of consumption in the country, the less, the greater the share of investment. The first group is countries that have fallen into the “poverty trap” against the backdrop of an undervalued national currency (according to 2019 data, among them are Armenia, Egypt, Ukraine, Georgia, Pakistan). The second group is similar to the first, but due to political and other reasons (according to the center's analysts, "there are no normal explanations for this") they invest a little more (these are Montenegro, Kyrgyzstan, India, Sri Lanka, Vietnam, Belarus). “Russia is more likely to belong to the second group, but not very confidently. It is rather between the first and the second,” explains Oleg Solntsev, co-author of the study. The third group is countries with expensive currencies (virtually the entire OECD minus Greece and Italy), which spend a lot on investments and demonstrate a high quality of life. “In Russia, the exchange rate of the ruble is now overstrengthened, and this is a dead end,” notes Mr. Solntsev.

First of all, the current level of the exchange rate (for the conditions of 2021) poses, according to the CMASF, a threat to the finances of some industries - net exporters. “We assessed the boundaries of the industries’ tolerance for the strengthening of the course,” the CMASF explains. “But this is more of an exercise.” Less than 16 rubles/$ is the break-even rate for only six of the least vulnerable industries: fishing, mining of metal ores; manufacturers of tobacco, clothing, other non-metallic mineral products and paper. Ten sectors are in the range above 16 rubles/$ and up to 44 rubles/$, including coal mining, metallurgy and chemistry, production of machinery and equipment, electrical equipment, furniture, petrochemicals, and animal husbandry. With an exchange rate of 44 to 63 rubles/$, six industries suffer: oil and gas, other minerals, wood processing, the forestry sector, the production of leather and other transport and equipment. In addition, the CMASF provides additional calculations of “autonomous fluctuations” in the balance of payments indicators associated exclusively with changes in the ruble exchange rate, revealing additional arguments in favor of capital controls (see Kommersant of February 25). Movement control is also important for maintaining the growth of GDP and investments (the arrest of the assets of the Central Bank, in fact, performs the function of controlling capital flows). After the inevitable reversal occurs and the exchange rate weakens, capital will return, interest rates will fall and investments will become cheaper.

As a result, the CMASF assessed the exchange rate prospects in two scenarios - optimistic (in which the world begins to grow by about 3% per year according to PPP, sanctions with an oil price ceiling for the Russian Federation do not work, part of gas supplies are preserved) and moderately pessimistic (in it, in in particular, the oil price ceiling works, gas supplies are reduced). In the first case, the average annual exchange rate of the ruble against the dollar fluctuates around 70 rubles/$ until 2024 and weakens to 84 rubles/$ by 2030. In the second, it rolls back from 84.4 rubles/$ in 2022 to 80.2 rubles/$ in 2024 and weakens to 92.7 rubles/$ by 2030. The real exchange rate of the ruble, according to both scenarios, will weaken by no more than 1% in the long term. “But these are conditional forecasts. Exchange rate shocks can very strongly reject them,” concludes Oleg Solntsev.

Alexey Shapovalov



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