It will collapse further: three prominent economists predicted the ruble exchange rate by the end of the year

As First Deputy Prime Minister Andrei Belousov said, the dollar exchange rate in the corridor of 80–90 rubles is considered comfortable for the domestic economy. That is, the current value of the national currency is quite acceptable from the point of view of the budget, as well as for exporters and importers.

A weak ruble traditionally helps the government plug holes in the federal treasury. But how does today’s course meet the interests of ordinary citizens? How will the value of the national currency change further?

The ruble has weakened sharply in recent days. Two weeks ago, the dollar cost 83-84 rubles, the euro – 88-89 rubles, and now it’s 89 and 97, respectively. What factors currently have the greatest impact on the national currency, pushing it down?

Nikolaev: Geopolitical uncertainty remains high, force majeure events increase the risks of a depreciation of the ruble. But we must definitely say about the main factor – the external trade balance has changed. This is the fundamental difference between this year’s situation and what it was a year ago, when export earnings increased.

Now the situation is reversed. Export earnings are declining, and in a significant way. Even according to the medium-term forecast of the Bank of Russia, if the export of goods last year amounted to $588 billion, then this year it should decrease by 26%, to $435 billion. – less improved, growing.

This imbalance is the main factor cementing the ruble depreciation trend that is taking place and that is likely to remain until the end of the year.

Goykhman: I agree that the main factor is the reduction in export earnings: the less currency comes in, the higher its rate. But there are other reasons, for example, inflationary pressure, which is largely associated with the increase in the budget deficit. That is, there is not just a reduction in foreign exchange earnings, but also a decrease in budget revenues. This is a very serious factor for the weakening of the Russian currency to continue.

Also actively influences the ruble and geopolitics. Uncertainty always creates risks and awakens the desire to go into the currency as a protective asset. This trend will continue, as there is no understanding of the prospects for foreign exchange market participants.

Kalyanov: The most important factors affecting the current exchange rate of the ruble are the dominance of imports over exports, increased government spending, and geopolitical escalation.

– The government considers the exchange rate in the range of 80-90 rubles per dollar comfortable for the economy. Now he has come close to the upper boundary of this corridor. According to what scenario, in your opinion, will events develop further: towards strengthening or weakening of the ruble?

Nikolaev: The trend will continue, the ruble will continue to weaken. If you look at the medium-term forecast of the Bank of Russia, then by the end of the year the dollar should cost 76.8 rubles. Now the exchange rate is about 88-89 rubles per dollar. So, in my opinion, 76.8 by the end of the year is an overly optimistic estimate.

The ruble will continue to fall. You should not count on the fact that more currencies will be sold on the market. According to information from the Bank of Russia, 80% of foreign exchange earnings were sold in May. It turns out that almost all of it is sold, that is, it is impossible to significantly increase the supply of currency. This is an additional argument in favor of the fact that the downward trend will continue.

Goykhman: The national currency will continue to lose ground. The sanctions factor also affects its condition: difficulties with imports, tracking supply chains, and restrictions on transit through Russian territory. Plus the costs associated with overcoming sanctions and the use of parallel imports. Costs will increase, there will be more commissions, delivery routes will become longer, and intermediary costs will increase.

Another important factor for the next six months is geopolitical, as international tensions escalate. Thus, I assume that the dynamics of the ruble will be negative. And most importantly: this dynamic is supported by the economic authorities, because they consider such a course comfortable for the economy.

But the higher the exchange rate, the higher the inflation. So there will be resistance to the fall of the ruble. From the side of the Central Bank, probably in the next six months there will be an increase in the key rate, which will be able to limit the rate of fall of the national currency. But in general, the movement of the ruble will be consistent in the direction of weakening.

– To what extent does today’s course meet the interests of ordinary citizens? Is it related to prices in Russian stores?

Nikolaev: Of course, there is a connection between the fall of the national currency and the rise in consumer prices, and the Russians have always felt this connection. The course fails, prices rise. The traditional explanation largely remains true: the foreign exchange component in imports is quite large.

It would seem that there is an active departure from the so-called toxic currencies, but nevertheless, if the ruble exchange rate against the dollar or the euro falls sharply, then inflation in the country grows. Despite the fact that the share of both the dollar and the euro in our economy is getting smaller, it is still very significant – about 60%. A lot of goods are still purchased with “toxic” currencies.

But there are other pro-inflationary factors. The sharp fall of the ruble is an incentive to increase the uncertainty of the economic situation. In such conditions, sellers and manufacturers begin to insure. They act from the logic of “it is not known what will happen tomorrow, you must at least earn money today.” If possible, they raise prices. This is their protection from risks and uncertainty.

At the same time, manufacturers and sellers might be happy, but they cannot afford to raise prices for their goods by tens of percent at once: they are forced to look at consumer demand, at the financial capabilities of buyers. And the latter are severely limited due to the fall in real incomes of the population. So don’t expect any crazy price hikes. Price growth will be in the range of 10-15%.

Goykhman: As the ruble weakens, inflation in the country will also increase. Now inflation is extremely low, but this is compared to last year, when prices were high. Elvira Nabiullina, head of the Central Bank of the Russian Federation, is very wary of the prospects for inflation, as she considers pro-inflationary factors: an increase in the money supply, an increase in consumer demand that is not backed by goods, and so on. it turns out a kind of communicating vessels: inflation is higher – the dollar exchange rate is higher; More dollar exchange rate means higher inflation. Therefore, there is an assumption that inflation will rise to 6.5% in the coming months. This is also a factor for the weakening of the ruble.

Kalyanov: As import chains become more complex, the cost of goods and services will continue to rise. But not only the population will be among the victims. Business representatives will also face negative consequences, who will have to pay much more for consumables and components.

– So, maybe it’s time for people to start focusing not on the value of the dollar and the euro, which have become “toxic” currencies in our country as a result of Western sanctions, but on the rates of the “friendly” yuan, lira or dirham? What is behind the talk that within the framework of the BRICS association, their own, supranational currencies may appear?

Goykhman: I think this is a very vague prospect. BRICS is a fairly powerful association, but in many respects it is self-contained. The relationships that the BRICS carry out on the external circuit (that is, exports and imports with other countries) must still be carried out in the currencies of those countries that we call “toxic”.

In addition, among the BRICS countries there is no such economy that would be sufficiently reliable, stable and well managed. But even if a supranational currency is developed, one economy will have to prevail in the new system. In this case, most likely, China will have to take the reins of government. But China doesn’t need to. It has no desire to make its national currency, the yuan, the dominant one in the world. This will undermine the position of the yuan itself and the Chinese economy in relations with countries that are important to China. First of all, these are the USA and EU countries.

If we talk about other BRICS countries, then there is no other state with sufficiently stable economic indicators in order to maintain the exchange rate of the supranational currency even within these relationships.

Kalyanov: Regarding the supranational currency: there are still more difficulties than solutions. It is expected that this currency will be non-cash and will be used by the BRICS countries and their trading partners for trade settlements. How will it be formed? There are several points of view here.

It will probably be a basket of currencies of countries that will be part of the BRICS at the time when this currency is launched. There are predictions that this will happen from 2025. Why is she needed? There is a process of global de-dollarization. A multipolar world is forming on the map. Many countries seek to avoid the possibility of pressure on them through such currencies as the dollar, euro, pound sterling, Swiss franc. They are striving for the transition to the calculation in national monetary units.

The new currency could potentially solve this issue. But there are a lot of difficulties. So, for example, a common financial system within the BRICS association should be worked out, which will allow the participating countries and their companies to have sufficient access to the financial system of another country, which are often quite closed – as, for example, in India and China.

Now, let’s say Russia has accumulated a huge amount of rupees, but she doesn’t know what to do with it. If this system were fine-tuned, Russia would be able to enter the market and sell rupees, the currency of its BRICS partner. Nevertheless, I believe that the launch of the single supranational currency BRICS will happen after some time and we will all know about it.

Nikolaev: Among the friendly currencies, one remains the strongest – the yuan. As you know, a few years ago, the yuan became one of the international reserve currencies. Meanwhile, in over-the-counter trading, the share of the yuan is 24%. This is already very good. Yes, there is 70% of the so-called toxic currency, but it is obvious that slowly the importance of the yuan, its share will grow. Therefore, it is worth paying attention to it, although the main thing is not to overdo it. The yuan, if it can replace the dollar-euro, it will definitely not happen quickly. This is not seen in the foreseeable future. But there is a tendency to strengthen the position of the yuan.

– The exchange rate of the ruble in our country is traditionally a very important and burning issue for citizens, especially during the holiday season. Should tourists take care of buying currency in advance and which one?

Nikolaev: Obviously, you should not put off such a purchase until the last. I understand that many people think: “maybe we should wait, and suddenly the ruble will get stronger.” But, you know, I’m sure: now there will be no strong rollbacks back. Purely pragmatic considerations make us give advice: buy now the currency you need for your trip, don’t delay.

— What will be the course in the second half of the year?

Nikolaev: I hope that the dollar will not break through the 100-ruble mark.

Goykhman: The dynamics may well be negative, and the dollar exchange rate is above 90. But, I note that last year, Deputy Prime Minister Andrei Belousov called the range of 70-80 rubles per dollar comfortable. Then we reached the upper limit of the range in the spring of 2023. Now he also called the comfortable range of 80-90 rubles. Probably, now the market perceives the upper limit of the new range as an indication to action.