Have the devaluation of the end



The September forecast of the Ministry of economy will assume a stronger nominal exchange rate, but with possible weakening of the dollar — end of a decline in its real exchange rate. Discussion about supporting the industry of the weak ruble is probably finished: under the current policy of the Central Bank of the Russian currency is stable, the Ministry of Finance is satisfied with the pace of deficit reduction, and arranging all the tools for the “soft” devaluation now the government does not. The debate about the ruble will inevitably return: by 2019, the economy Ministry expects a decline in the current account in two years to 0.4% of GDP, and this is again a game changer for the national currency.

Reuters yesterday circulated with reference to the working materials of the Ministry of economy preliminary data of the changed macroeconomic forecast of the Ministry for 2017 and 2018 to 2020 — including estimates of nominal GDP in our scenario, GDP dynamics year-on-year, the calculations of the current account and the average annual rate of the ruble to the U.S. dollar. Speech, apparently, goes about the materials to the last working meetings in the White house, prior to consideration of the accompanying budget documents in late August — early September. The economy can theoretically change the parameters of the forecast and after the adoption of the budget by the state Duma, but in practice September version — the latest affecting its basic parameters.

The economy Ministry took a break in the comments on the published figures, they are, however, not refuting. Message Reuters is primarily important for the global players in the currency market and the news of August 28, contains key information for them: the Ministry of economy, and with high probability, and the Ministry of Finance based on forecast data, for the first time agree that a significant weakening of the ruble in the next few years, expect it’s not necessary. Probably in September and it is expected formal completion of at least a semiannual great debate in government circles about whether Russia’s “currency war” and does it make sense to win it.

In the previous (April) version of the calculations of Ministry of Economics it was assumed that the average rate of the ruble to the U.S. dollar will be in 2017 to 64.2 rubles./$, in 2018 it will be reduced to 69.8 rubles./$, and in 2019 — to 71.2 RUB /$ in 2020 — up to 72.7 rubles /$. Evaluation of the ruble in 2017, made in June, almost irrelevant. Despite the fact that the dependence of the Russian currency on oil prices in recent months has declined, oil prices remain the main driver of strengthening and weakening of the ruble. An early version of the forecast assumes that the average oil in 2017 will cost the same $40 per barrel (price cut in the new “budget rule”). The first quarter of 2017, when oil cost just under $50 per barrel, made the calculations correct — in April the average price of oil was calculated as $45,6 per barrel. The current version assumes an average oil price of $49 per barrel and the average annual exchange rate of the dollar should be RUB 59,7 /$ (approximately the current rate).

The Ministry Maxim Oreshkin has almost no ability to abandon the main informal agreement with the Finance Ministry and the Central Bank — budget projections for 2018 to 2020 are calculated from $40 per barrel plus the expected inflation in the United States — that is, regardless of the current situation in the budget forecast to 2019 the oil should cost $41,6, and 2020 — $42.4 per barrel. However, in the September version of the forecast of analysts of the economy from this principle depart in 2018 the oil price is expected at $43,8 per barrel, which suggests at least the absence of shocks in the oil markets until the first quarter of 2018.

The ruble in the calculations of the Ministry of economy in 2018 is 64,7 RUB / $ by 7% higher than the previous forecast.

For 2019, the variance of the September forecast from April’s slightly higher — 7.4 percent (average annual rate in 2019 — 66,9 RUB /$), and in 2020 and 6.4% (68 RUB /$). It should be noted that in 2019-2020, the economy returns to the old arrangements — the estimated oil price in 2019 is forecast the same $41,6 per barrel in 2020 to $42.4 per barrel. Now, before the publication of the full economy calculations according to the forecast of the balance of payments, is possible only rough estimates of the parameters of the real effective exchange rate to a basket of trading partners of the Russian Federation, which is usually used CB as the main indicator of the weakening or strengthening of the real ruble exchange rate. Nevertheless, it is clear that the economy Ministry now believes it is unlikely the strong depreciation of the real exchange rate through the year 2020 if oil prices remain at $50 per barrel, the ruble will be in the range of 59-62 RUB /$.

Moreover, under some weakening of the US dollar against the Euro is likely and a return to the appreciation of the real effective exchange rate pre-crisis scenario. Estimates of the current account of the forecast of the Ministry of economy show that the Agency expects to reduce this figure in 2018 to 0.5% of GDP in 2019-2020, and to almost zero (0.1% of GDP). In practice, the logic of the economy implies that zero current account should be expected at higher (20% higher than forecast) oil prices in the beginning, not the end of 2019 — apparently, the Ministry is convinced of this high rate of recovery of imports, especially investment.

The expectation of a stable exchange rate at a level previously considered by the office Maxim Oreshkin too high, coincides with the increase in the forecast of dynamics of GDP in 2017-2020 years — this year Ministry of economy will growth by 2.1% (see page 2), 2018-2020 — to 2.1–2.3 percent in the April expectations of 1.5%. Such a change cannot be construed as consent with the thesis “the strong ruble will not prevent some acceleration of economic growth.” However, the idea of planning and a strong ruble is unlikely to be a long-term course. 0.1% of GDP current account is the threshold after which the ruble will behave, apparently, fundamentally different, especially when you consider that the government has not yet got used to the idea of a fully balanced budget, and in reality the deficit is maintained, and the capacity of the domestic market for public debt (external borrowings limited by the sanctions and country risk) are still small. However, even the strong ruble, with inflation at 4% per annum is a very good Outlook for investors in Russia.

Dmitry Butrin

The best rates of currency exchange see Rambler