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Economics Ministry Sees Ruble Problem
The concept for the long-term socio-economic development of the Russian Federation through 2020 published by the Ministry of Economic Development foresees a turning point in economic policy in 2012. That year, the ministry projects, there will be a transition from strengthening the ruble to weakening it. In 2010, the balance of payments will become negative due to rapidly growing imports and interest payments on foreign debts and the balance of foreign trade will do the same shortly after it.
The payment balance will have to be balanced from the net influx of capital, which is forecast to be 4-4.5 percent of the GDP. By 2020, that figure will be about $300 billion. If the ruble is not weakened and the Central Bank’s reserves are not reduced, a high level of foreign borrowing will be needed.
The ministry does not undertake in the document to set a specific measure on how much the ruble will need to be weakened. The answer to that question depends on forecast. In the scenario with inertia, greater devaluation will be needed in 2011, 2012 and later. The ministry indicates that the real 0065change rate of the rubles will have to be lowered by 15-20 percent, which, depending on the rate of inflation in Russia and the world, will correspond to a nominal devaluation of 15-25 percent.
Even in the most optimistic scenario, the ruble will have to be weakened to ensure the stability of the balance of payments and the competitiveness of domestic producers. In the document “it is assumed that the real, effective exchange rate will stop strengthening by 2011 at the level of 9 percent higher than the level of 2007.” With inflation of 7 percent in Russia and 3-4 percent in the rest of the world, that will correspond to a weakening of the ruble by 3-4 percent per annum of the main trading partners. Also, the answer to the question of the specific amount of weakening depends on the payment balance and thus the exchange rate of the ruble depends on foreign economic conditions, most of all on oil prices.
www.kommersant.com
All the Article in Russian as of Aug. 08, 2008
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Photo: Ivan Grankin
