Experts doubt the forecast of the Ministry of Economic Development of the dollar for 70 rubles

Expert: “The ruble will tend to lower values”

This year, the average annual exchange rate of the ruble will be 70 per dollar, and this is a “balance for the economy” level, said Ilya Torosov, First Deputy Head of the Ministry of Economic Development. And if it is not necessary to argue with his second thesis, then the initial forecast is doubtful. December is still far away, you never know what can happen – both in geopolitics, and in the global economy, and with oil prices, and with Russian raw material exports.

According to Torosov, the indicator of 60 rubles per dollar “categorically does not suit exporters”, as it makes their business unprofitable. In addition, the budget, which receives less revenue, suffers from a strong ruble. The restoration of imports, including through parallel imports, contributes to the weakening of the domestic currency, the First Deputy Minister added. All this is true, but there are nuances, as they say.

On Monday, January 30, the rate of the “American” on the Moscow Exchange was 69.5 at the moment. As the Central Bank explained earlier, the weakening of the ruble in December 2022, which was a turning point for it, was due to two factors: a decrease in exporters’ foreign exchange earnings (and, accordingly, a drop in foreign currency sales) and an increase in demand from individual bidders. Meanwhile, the government does not expect any special surprises in the dynamics of exchange rate formation, not only in 2023, but also in the next three years. And this “confidence in the future” Torosov just confirmed.

But now, in the conditions of a long-term sanctions reality, one cannot be 100% sure of anything. It is obvious that the exchange rate has become much more dependent on the export of raw materials, since the budget rule, which leveled out price surges in the market, has lost its relevance. If earlier the cost of the domestic grade of Urals oil lagged behind the prices of Brent by only a couple of dollars, today the gap has increased to about 25%. There is nothing good in this either for the ruble, or for the budget, or for the domestic economy as a whole. Inflationary risks are objectively growing, and it will be more and more difficult to replenish the treasury. The cap on Russian oil prices, which went into effect on December 5, is costing Moscow €160 million ($172 million) a day. Last month, crude oil exports from Russia fell by 12%, selling prices – by 23%, and sales revenues – by 32%, according to the Finnish Center for Energy and Clean Air Research CREA.

“If the price ceiling remains at $60 per barrel, this will allow replenishing the budget,” says Artem Deev, head of the analytical department at AMarkets. – But if the cost of domestic raw materials falls below $50 due to the growth of the discount, while reducing production, this will require additional injections from the NWF in large volumes. The treasury will simultaneously receive less income tax (due to reduced exports) and MET (mineral extraction tax).”

And the February embargo on Russian oil products will have a negative impact on domestic production – refineries will begin to reduce production volumes. In this scenario, by the end of the first quarter of this year, the ruble will weaken to the range of 75-80 per dollar, Deev notes.

“Forecasts of the Ministry of Economic Development sometimes sound unfounded,” says financial analyst Sergei Drozdov. – Since the Central Bank and the Ministry of Finance make the weather on the Russian currency market, there is more confidence in them. At the same time, the goals and objectives of these two departments are in opposition: if the first is interested in curbing inflation, then the second needs a weak ruble. Last year, the Central Bank “tightened the rope” (manually adjusting the exchange rate), in this case the situation is not in its favor. Much will depend on the price situation in the energy market and, of course, geopolitical risks. The year has just begun, and they count chickens in the fall: only in the fall will there be some kind of clarity with the average ruble exchange rate, which is traditionally traded in ranges. While the rate tends to the upper limit – 73 per dollar, but if it suddenly exceeds it, the devaluation may accelerate. In general, most of the long-term forecasts are not representative.”

The average annual exchange rate does not mean the absence of its fluctuations during the year. The Ministry of Economic Development is still waiting for the ruble to weaken in 2023, but it will be insignificant, says TeleTrade analyst Alexei Fedorov. That is, in some period, the ruble may drop to 80 per dollar, but then it will return to the range of 70-75. Accordingly, by the end of the year, the average annual exchange rate of the ruble will be the required 70 per dollar. And this is the baseline scenario for the Ministry of Economic Development, which does not include the realization of the risks of a cyclical crisis in the global economy. How likely this option is is debatable. At the end of 2022, his chances were estimated at 50-60%, but after inflation slowed down in the United States to 6.5% (in annual terms) and gas prices in Europe fell to $600 per thousand cubic meters, the risks began to fade.

“The Russian financial market is still inaccessible to investors from “unfriendly” countries, which means that the key factor in the exchange rate of the ruble is the state of the trade balance of the Russian Federation, Fedorov says. – The record surplus is shrinking, because, firstly, imports are recovering, and secondly, oil and gas export earnings are declining. Due to the slowdown in the global economy and sanctions restrictions, the demand for Russian energy resources is falling. The ruble exchange rate will obviously tend to lower values.”