The ruble collapsed, rolling back to the figures of early May: experts give gloomy forecasts

Sanctions and holes in the treasury are pulling the Russian currency into the abyss

At the beginning of trading on May 16 at the Moscow Exchange, the dollar exchange rate for the first time since the beginning of the month exceeded the bar of 80 rubles. The euro rose to 87, which was also a two-week high. The growth of the budget deficit and Western sanctions, which slow down revenues to the treasury, lead to the collapse of the Russian currency. There is reason to believe that the “wooden” will react painfully to these and other negative circumstances all summer long, therefore, most likely, it will continue to depreciate.

Tuesdays are not the best days of the week for Russian banknotes. For the first time in 1994, then in 1998, a decade later in 2008, and finally at the beginning of the currency crisis in 2014, the rate of the “wooden” fell sharply on Tuesdays for one reason or another. In mid-May, history repeated itself. On the morning of the 16th, at the Moscow Exchange, the dollar exchange rate jumped above the psychological threshold of 80, and the euro exchange rate reached 87 rubles. This pushed back the rate of “wooden” to the beginning of the month.

The negative dynamics on the stock exchange only confirmed the shaky positions of our national currency. According to the data of the Central Bank, since the beginning of the year the real effective exchange rate of the ruble has fallen by more than 20%. In April alone, this figure fell by almost 7%. The exchange rate of the ruble against the euro during the same time sank by almost 22%, and in April European banknotes added more than 8%.

“The sharp weakening of the ruble occurred against the backdrop of reports of the forthcoming 11th package of Western sanctions against our economy. At the summit in Hiroshima from May 19 to 21, the G7 countries will present new restrictions that will touch on loopholes to circumvent existing measures. Other reasons for the depreciation of the Russian currency are the budget deficit, a 52% collapse in oil and gas revenues, and a possible decline in world energy prices, which widened the hole in the treasury to 3.4 trillion rubles,” said Kirill Dronov, Managing Director of Alfa Forex.

The effective exchange rate is an indicator of the exchange value of domestic banknotes and is calculated on the basis of real and basic quotations, taking into account various indices, for example, external trade turnover with each of the trading partner countries. An assessment according to such a wide range of criteria, in fact, makes it clear about the economic situation in the country as a whole, since the exchange positions of the national currency serve as an indicator of development or regression in the industrial and consumer sectors.

Meanwhile, according to the forecast of the head of the Ministry of Economic Development Maxim Reshetnikov, in 2023 the average annual dollar exchange rate will be at the level of 76.5 rubles. Representatives of his department believe that the “Russian” is often evaluated below a fair level, but this is quite normal for floating exchange processes.

A small chance for exchange rate stabilization is given by a potential downturn in the Russian economy. Although the International Monetary Fund recognized the resistance of the Russian economy to sanctions and estimates the growth rate of our gross domestic product by December at 0.7%.

However, while in such a favorable outcome is hard to believe. At the end of spring, market dynamics turned out to be not on the side of the “wooden” one. An additional “bump” was set up by problems with payments in rupees: our country has accumulated too much Indian cash and now does not know what to spend it on, since New Delhi is not able to offer us anything bulky and expensive (going beyond traditional trading positions).

The Federal Customs Service does not disclose all information about Russia’s foreign trade activities, says Vladimir Chernov, an analyst at Freedom Finance Global. However, representatives of the department implicitly hint at an increase in imports, which, according to the results of the first quarter, will turn out to be no worse than last year. However, there are also skeptics: according to preliminary data from the Central Bank, in January-March our foreign trade surplus will amount to only $29 billion, which is almost three times less than last year’s results. “Therefore, in any case, the value of the dollar is unlikely to fall below 75-76 rubles, since even if commodity prices rise, we must not forget that Russia exports energy resources at a big discount. Therefore, oil and gas are now a much less noticeable support for budget revenues than before,” the expert believes.

In such a situation, experts predict that during the summer holidays, the dollar will rise to 83-86, and the euro – up to 80-90 rubles. “In addition to the above economic circumstances, the instability of its course is exacerbated by geopolitical risks, especially those related to the activity of events in Ukraine,” adds Kirill Dronov.