Analyst Osadchy told what the ruble exchange rate will be in 2024

Russian President Vladimir Putin, at a large press conference on Thursday, December 14, linked the ruble exchange rate with the demand for goods produced in our country and export prices, emphasizing that its formation remains floating. The head of state added that he proceeds from the fact that the ruble exchange rate is “normalizing.” The next day on the Moscow Exchange, the dollar was around 89.9 rubles, the euro at 98.9, and the yuan was 12.7 rubles. Maxim Osadchiy, head of the analytical department of BKF Bank, told MK about how the ruble will be traded at the end of December and whether the Russian President’s promise to “normalize the exchange rate” of the national currency will come true.

— The year is ending, what happened to the ruble during the year?

— Over the year, the ruble devalued by 40%. It could have devalued even more, but the tightening of the monetary policy of the Central Bank of the Russian Federation – raising the key rate – reduced the pressure on the ruble. The main reason for the weakening of the ruble is the growth of imports against the background of a decline in exports. The price of oil, the main item of Russian export, is declining and is already at a six-month low. Devaluation contributes to increased inflation due to higher prices for imported goods.

— Is the depreciation of the ruble always bad for Russians?

— Devaluation also has its advantages. First, devaluation helped reduce the budget deficit. Secondly, it weakens demand for imports and strengthens the position of national producers.

— How does the ruble look compared to other currencies?

— Our ruble looks good against the background of such currencies as the Lebanese pound, which devalued by 900% over the year, the Zimbabwean dollar, otherwise called the “Zimdollar,” which devalued by 750%, the Syrian pound and the Argentine peso, which devalued by 400%. On December 13, the Argentine peso was devalued by 50% in just one day.

— Are there any attempts by the authorities to introduce new protective mechanisms to stabilize the ruble?

— In response to the August collapse of the ruble, when the rate broke through the sacred level of 100 rubles per dollar, attempts intensified to borrow from their neighbors some cunning mechanism to stabilize the national currency. In September, Minister of Economic Development Maxim Reshetnikov proposed using the “Chinese membrane”, which provides for the division of the national currency into “onshore”, circulating only in the domestic market, and “offshore”, intended for the foreign market. Essentially, this membrane is a currency control tool. At a minimum, such a reform will reduce confidence in the “domestic” ruble. And it will increase the costs of participants in foreign economic activity.

—You don’t support radicalism in economics?

— Carrying out radical monetary reforms, especially in the context of a geopolitical conflict, is a risky undertaking. There have been examples in history when monetary reforms caused extremely unpleasant consequences. Thus, the introduction of copper money under Tsar Alexei Mikhailovich led to the “copper revolt” of 1662. Fyodor Rtishchev’s cunning idea was to finance the conduct of the Russian-Polish war, in particular for Ukraine, by issuing copper money at the price of silver. Moreover, the treasury paid servicemen and other people in copper, and collected taxes in silver. This idea led to a massive devaluation of copper money, hyperinflation and a “copper revolt.” The Tsar-Father was almost beaten by the ungrateful slaves. The revolt was harshly suppressed, but the reckless monetary reform had to be curtailed.

There are more recent examples. Thus, at the beginning of this year, monetary reform in Nigeria, in particular the introduction of a central bank digital currency, led to mass unrest and became one of the main reasons for the defeat of the country’s president in the elections. But one of the goals of the reform was to depreciate the reserves of Nigerian currency accumulated by the opposition.

— Let’s return to Russia. Isn’t it time for our citizens to open foreign currency deposits?

– It’s early. There are restrictions on foreign currency deposits until March 31, 2024, and these restrictions are likely to be extended. Moreover, these restrictions apply to both toxic and non-toxic currencies. Although I have not seen any explanation why deposits in friendly currencies are subject to the same restrictions as deposits in unfriendly currencies.

Russians react to these restrictions rationally, but not patriotically: by reducing foreign currency deposits in Russian banks and increasing deposits in foreign banks. The process of yuanization of foreign currency deposits of the population is much slower than the process of yuanization of company funds. As of November 1, the share of foreign currency deposits and funds in the accounts of legal entities in Russian banks in non-toxic currency (primarily yuan) reached 49%, while in the accounts of individuals it was only 17%.

— At a big press conference on December 14, the Russian President announced that the ruble exchange rate was gradually normalizing. Do you think that this normalization will be within the range of 100 rubles per dollar?

— The psychologically significant level of 100 rubles per dollar will be broken in 2024 “Highly Likely,” that is, with a high degree of probability. It was first broken in 2022, then in 2023. It looks like a tradition is emerging. But reaching the level of 200 rubles per dollar, which some “hot heads” have been talking about lately, still seems unlikely. Undoubtedly, the country is stabilizing its economy and finances. Accordingly, the range of fluctuations in the national currency exchange rate is reduced.