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Hopes for Ruble Appreciation Could Be Unjustified
In 2008, Russia’s corporations will raise $125 billion overseas to add to the current loans of $400 billion, Alfa Bank analysts forecasted. According to RBC Daily, the flow of money of this extent will enable financial authorities of the country to proceed with ruble appreciation at the rates they would find the best for this purpose. The bad news is potential collapse of economy provoked by these efforts.
According to Alfa Bank, the corporate debt of Russia doesn’t exceed 30 percent of GDP, and it is an average indicator actually. Russia has the ratio of 26 percent of GDP, which, however, notably affects its macroeconomic indicators, Alfa Bank specified.
The forecast of Alfa Bank is that the banks will raise at least $65 billion and the companies will attract $60 billion in 2008. The aggressive intention of Russia’s companies (especially the banks) to attract new loans coupled with accelerated growth in GDP will enable the Central Bank of Russia to be less agitated about the increase in exchange rate of the ruble.
The market analysts don’t challenge the outlook of Alfa Bank, specifying that the ruble appreciation is particularly vital for the corporate debt, as the better part of companies and banks borrowed in dollars in hope for their long decline. But the movement of U.S. currency in 2008 will hardly copy this year’s performance. Washington will have a new administration in 18 months, and the future leaders are well-expected to curtail military costs. Given that the market usually responds somewhat in advance, the U.S. dollar could start appreciating already next year, some analysts forecast.
What’s more, presidential elections in Russia won’t last for ever. They are slated for the first quarter of 2008 and their finish will end the need for ruble appreciating in part of attaining inflation targets. The ruble will hardly appreciate above 24.3 per a U.S. dollar in the following two years, while the inflation won’t sink below 7 percent. The aftereffect could be bankruptcy of companies that have staked on material appreciation of national currency when raising money overseas, the market analysts predict.
According to Alfa Bank, the appreciation of above 24.5 ruble/dollar will be followed by sharp decline in national currency, driving up the risks for economy at large and primarily for the bank sector.
www.kommersant.com
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