Russia: Ruble slides again, WB predicts upswing for 2016-17

The ruble has slid to its lowest point in five weeks after the CBR suspended its foreign exchange auctions in order to keep the value from going too high. Specifically, the CR suspended the sale of its one-year foreign currency repurchase agreements, purposefully focusing any remaining investor attention on high-yield ruble-denominated assets. The CBR is managing a so-called “dirty float” to stabilize the currency against investor speculation that would drive it up higher than its value or run it down to the point where foreign trade becomes difficult. Likely, this is part of an effort to position the economy for recovery and to regain purchasing power for foreign goods as well as raise the price of foreign exports like oil and gas.

Many international monetary and financial institutions have praised Russia’s handling of the crisis thus far, with some like the IMF and World Bank revising their growth trajectories for 2016 and 2017 significantly upward as a result of its current trends. All, however, still predict the recession to cause the economy to contract for 2015. The World Bank forecast has assumed an average oil price of $58 a barrel for Brent crude for the rest of 2015 and $63.6 a barrel for 2016. However, this is not the sole determinant of a healthy Russian economy, as many have noted that consumption levels remain extremely low – but most economists in the report estimate that consumption will increase as the ruble regains its purchasing power domestically and the country adjusts to new sources of importation for foods.

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News Briefs:

  • Ukrainian President Petro Poroshenko has appointed former Georgian President Mikheil Saakashvili as governor of the Odessa Oblast, a surprisingly controversial move that has led to widespread fallout in popularity. Odessa residents believed initially it was a prank but Saakashvili was introduced by Poroshenko as a reformer and a necessary inclusion into Ukraine’s new government.
  • Russian authorities in the Kremlin have decided to move the Parliamentary elections forward in several provinces this year, in order to stave off the negative effects of the current recession and to keep a grip on power. Memory is still fresh for Kremlin officials of the State Duma elections of 2011, which resulted in large-scale and embarrassing protests against the regime in Moscow. Additionally, opposition leaders currently have a great deal of momentum behind them, with the murder of Boris Nemtsov in February and the current recession, it is probably that they could win several more seats in the Duma.
  • Iran is set to receive S-300 air defense system from Russia once a contract is agreed upon, stating that Russian authorities had removed all restrictions on military deliveries. Originally, Iran was going to receive these weapon systems in 2010 but President Vladimir Putin signed a decree two months ago that ended the ban on sales.
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