Is there life after 100 rubles per dollar

August lived up to its gloomy reputation for the ruble – the US dollar not only briefly broke the 100 ruble mark, it also managed to “feel” the level of 102 rubles. True, the Bank of Russia immediately entered the game, which, at an unscheduled meeting in the middle of last month, promptly decided to raise the key interest rate to 12% in order to avoid a surge in inflation, and the dollar had to retreat.

Nevertheless, the “American” still costs more than 90 rubles, and the “counteroffensive” of the dollar to the level of 100 rubles in September looks even more real than a rollback back to the area of ​​85 rubles and below. It follows from this that the Russians need to be prepared for any surprises in the foreign exchange market and, perhaps, even get ready to live for some time in an environment where the dollar can gain a foothold above 100 rubles for a long time. How will this situation affect the Russian economy and the lives of ordinary Russians? Is it a disaster or, perhaps, on the contrary, a blessing? Who benefits from a strong ruble, and for whom is an expensive ruble unprofitable? It is obvious that the majority of the population of Russia benefits from the ruble strengthening and not depreciating. The cheaper the ruble, the lower the salaries and other ruble incomes of Russians in terms of dollars and other world reserve currencies. For example: from 2013 to 2023, the size of the average pension in Russia in rubles doubled – from 10,038 rubles. up to 19 322 rub. per month. However, due to the simultaneous depreciation of the ruble against the dollar over the same period by almost 2.6 times (in 2013, on average, only 31.85 rubles were given per dollar), the average pension in the Russian Federation in dollar terms not only did not increase , but, on the contrary, fell by 26% – from $315 to $230 per month. That is, in 2013 the average pension in Russia was comparable to the similar pension in the countries of Eastern Europe that are members of the EU, and now it is comparable to the average pension in Indonesia, Thailand and Vietnam. So ordinary Russians and socially vulnerable groups of the population are primarily interested in a strong ruble.

A strong ruble is also important for Russian business, which is focused only on the domestic market. In the domestic market, enterprises receive all their revenue in rubles, but production costs in many industries are highly dependent on imports. The stronger the ruble, the cheaper imported raw materials, materials, components and equipment cost enterprises. If the ruble depreciates, then this increases the costs of the construction industry, where the lion’s share of building materials and equipment is imported from abroad, and it has not yet been possible to completely “replace imports” of these products. For logistics companies, especially those involved in road transport of goods, a strong ruble is also important, since imported vehicles and spare parts for them become more expensive with a cheap ruble. For commercial banks, which, it would seem, can earn both with an expensive ruble and with a cheap one, a strong depreciation of the national currency is very unprofitable, since in this case they have to create large reserves in case of loan losses, as required by the Central Bank of the Russian Federation, and the creation such reserves negatively affect their net income and can even lead to losses. Recall that in 2022, when the dollar soared to 110 rubles, almost the entire Russian banking sector came out at a loss, as it had to insure against possible losses by creating reserves. The cheap ruble is also unprofitable for bank depositors, since this situation motivates Russians not to save for the future, but to quickly spend everything they have earned, fearing that ruble savings may depreciate at any inopportune moment. The service sector (for example, retail), and many industries, with a cheap ruble, are faced with an outflow of labor migrants, who immediately become unprofitable to work in Russia for low wages in rubles. And this means that business costs are growing, because Russians do not want to work for the salaries of migrants.

At first glance, so many social groups and business sectors in Russia need a strong ruble that a fall to 100 per dollar looks almost like a catastrophe for the economy. However, if you look closely at the situation, then even such a course is not at all a reason for panic.

First, a cheap ruble is not only beneficial, but sometimes even vital for exporters. The cheaper the ruble, the cheaper Russian export products on the world market, and therefore more competitive. Inexpensive energy resources and other raw materials from Russia made it possible by the beginning of this year to very quickly reorient Russian export flows from the West, where there is an embargo on Russian oil and a “price ceiling”, to the eastern and southern directions. Simply put, Russia managed to replace consumers of its products in the shortest possible time, and the depreciating ruble played an important role in this.

Secondly, the cheaper the ruble in relation to world reserve currencies, the more it allows to attract ruble revenues to the state budget and the National Welfare Fund. If a barrel of Russian oil is worth, say, $70 on the world market (with a discount to world prices), then at a dollar exchange rate of 80 rubles, in terms of this, this gives 5,600 rubles, and at a rate of 100 rubles. – already 7000 rubles, that is, 25% more. Accordingly, with a cheap ruble, the state budget attracts additional ruble revenues, simply from the difference in exchange rates.

Thirdly, a cheap ruble, although it leads to an increase in the price of imports, at the same time stimulates import substitution. If the goods that Russia currently imports en masse from abroad begin to be produced domestically, then many industries will be able to get rid of their critical dependence on imports. Of course, this will not happen overnight, since even many domestic goods depend on imported raw materials and components, but over time, as domestic production develops, entire industries will no longer be as sensitive to the fall of the ruble as they are today.

Fourth, when the ruble is cheap, it is more profitable for investors (whether Russian or foreign, private business or state corporations) to invest in the real sector of the economy than when the ruble is too expensive. For example, in such conditions it is profitable to build factories, which will then earn on the export of products and bring currency to both the owners and the state budget. Recall that in crisis conditions, including the depreciation of the ruble, in Russia the construction of large enterprises and infrastructure often began, which later paid off very well. Therefore, a weak ruble is not a hindrance to today’s investments and future economic growth.

So even if the dollar rises to 100 rubles, and even if it stays at this mark for a long time, such a situation, although not welcomed by the population, will not paralyze the economy, and may even create conditions for future development and growth. One can argue for a long time about which ruble exchange rate is fair, that is, optimal for exporters, for the population, and for the state. A year ago, the Government of the Russian Federation called 70–80 rubles such a “fair” corridor. per dollar, and a few months ago – already 80-90 rubles. In our opinion, it is not entirely correct to argue about figures in absolute terms, that is, about how much rubles should be given for one dollar. It is more correct to argue about the level at which the ruble will be predictable, that is, at what point it will be possible to assert with confidence that tomorrow it will not collapse by tens of percent or, on the contrary, will not rise in price as sharply. This is important for everyone – for business, for the population, and for the state.

It seems that today the exchange rate of 90-100 rubles per dollar suits exporters and the budget and does not cause too much damage to the population of the country. With such an exchange rate, the Russian economy can not only survive, but also develop, as evidenced by the figures for Russia’s economic growth in the 1st half of 2023 – 1.6% in annual terms. But in the future, as soon as the macroeconomic and geopolitical situation allows, the Russian authorities should think about what and how can be done to avoid sharp fluctuations of the ruble in any direction.