The Russian ruble fell to dramatic lows on December 8, sinking to
68.5 against the US dollar and 74.4 against the euro for the first time
since September, with Russian analysts linking the Russian currency’s
downward spiral to slumping oil prices.
“It’s basically one-to-one now. One dollar per barrel change in oil
prices causes around one ruble per dollar depreciation in terms of
declining oil prices,” Natalya Orlova, chief economist at Russia’s Alfa
Bank, told New Europe by phone on December 9.
Brent crude prices sank under $40 on December 8 for the first time in
almost seven years following a decision by the Organization of
Petroleum Countries (OPEC) on December 4 to maintain record-high oil
output levels.
The slide in oil prices and Western sanctions over Moscow’s
annexation of Crimea and its alleged involvement in Eastern Ukraine have
taken their toll the oil-dependent Russian economy in recent months.
Russian Finance Minister Anton Siluanov has reportedly warned that
next year’s budget could be adjusted to the new circumstances.
“With oil prices what they are today, losses of budget revenue could
represent some two percent of the GDP, according to estimates from the
finance ministry,” Siluanov said. “This means that in order to fulfil
the goal set by the president — maintain the deficit below three percent
of the GDP — we will have to find new revenue sources, a more
conservative approach to spending and measures to stimulate economic
growth.”
Orlova noted that for the budget the decline of oil prices per se is
quite neutral. “When you have declining oil prices and depreciation of
the ruble for the budget this is neutral because the decline of oil
prices is compensated by the ruble depreciation for the budget because
the budget is in rubles,” she said.
She said that the question is what the implications would be for
Russia’s growth. “I think that because of the sanctions on Turkey growth
will most likely remain positive next year,” Orlova said, explaining
that Russia’s decision to close its markets to Turkish products after
the latter downed its SU-24 warplane near Syria will give Russian
producers more opportunities to increase their output.
Orlova, however, warned that inflation is likely to be higher than
forecasted. But she added that taxes are likely to bring higher revenues
for the budget. “I would not be too pessimistic about the budget
revenues,” she said.
Russian President Vladimir Putin banned Turkish goods including
everything from turkeys and chicken to produce such as cucumbers,
tomatoes, onions, and tangerines from January 1, which comprised about a
quarter of Russia’s imports from Turkey in 2014.
The main concern about next year’s budget is expenditures, Orlova
said, adding that there would be higher pressure on the government to
increase public sector salaries and pensions ahead of next year’s
parliamentary elections to make up for the increased inflation.
The ruble lost around half of its value in 2014 but recovered
slightly as energy prices stabilised this year, allowing officials to
claim the worst of the crisis had passed.
Asked if a low oil price in 2016 will cause problems for the Russian
economy next year, Orlova said, “Not really because we are in the
flexible exchange rate regime now. The adjustment of the ruble exchange
rate following the oil prices doesn’t necessarily cause any liquidity
squeeze in the system. It can be that some of the companies that had
very high exposure to dollar levels might be in trouble. But the
situation now is definitely much, much better as supposed to the period
when Russia was in the fixed-rate regime”.
http://neurope.eu/article/sanctions-falling-oil-prices-rock-ruble-to-record-low/