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In the first half of 2020 we can expect the strengthening of the ruble

The Ministry pointed out that in the first half of 2020, the ruble will continue to strengthen. Minister Maxim Oreshkin argues that this process indicates a low domestic demand. In nominal terms, in 2019, the growth rate amounted to 12.5%, but the strengthening of the ruble is possible only under condition of preservation of current rates on loans and implementation of the current budget parameters.

 

In the review, the Ministry says - “according to the Ministry of economic development, maintaining the current level of interest rates on Bank credit products and the implementation of the current budget parameters will determine the persistence of low levels of aggregate demand, continuing the trend of strengthening of the ruble and stable anchoring of inflation below 3% in the first half of 2020.”

 

The decline in demand by households, companies and the public sector will lead to lower total loan offer that from December 2018 to November 2019 amounted to 4.8% of GDP. At the same time, Bank credit for the private sector remains below 4% of GDP. The Ministry of economic development say - “the rate of growth of all types of credit to the nonfinancial sector show a stagnation or a reduction.”

 

After 2018, the ruble depreciated by 17.5%, 2019 was significant for the Russian economy, as the ruble strengthened against the dollar by 12.5%, showing the second best result in the world after the Ukrainian hryvnia. 9 January 2019 on the Moscow exchange, the ruble was trading at the level of 61.25 RUB, virtually unchanged compared with the previous trading day.

 

Maxim Oreshkin, who is the Minister of economic development, said: “this evidence is extremely weak domestic demand, as we observed a low rate of inflation”, so the strengthening of the ruble in 2019 does not mean that Russian economy goes up. Low demand is most obvious during consideration of the negative dynamics of imports in ruble terms. The result is a growing balance of payments surplus, which strengthens the ruble.

 

Experts often point that in the absence of external shocks, the prospects of the ruble is more favorable in 2020. As low domestic demand and the influx of non-resident investors which will invest in Russian financial assets, namely bonds Federal loan will lead to the strengthening of the ruble. The influx of investors is provoked by attractive interest rates as in developed markets, rates are still negative or even low.