The ruble is falling, prices are rising. We have experienced this scenario many times.
Photo: Shutterstock
The ruble is falling, prices are rising. We have experienced this scenario many times. Especially memorable was the spring of 2022, when the dollar rose strongly to 120 rubles. Fortunately, the situation stabilized, and in the summer and autumn of last year the ruble strengthened to very indecent values - they began to give a little more than 50 rubles for US currency. As a result, prices fell.
Unfortunately, this year the trend has changed: the weakening of the ruble since the beginning of the year amounted to more than 30%. The historic moment came on August 14, when the dollar exchange rate for the second time in history reached 100 rubles. How will this affect our wallets? Is it worth waiting for the exchange rate to stabilize after the Central Bank raises the reference rate?
WHY THE RUBLE FELL
Any currency – ruble, dollar, euro or yuan – is, in a sense, a commodity. It is bought and sold on stock exchanges and banks. When the demand is high and the supply is low, the price of a good (in our case, the exchange rate) rises. And vice versa.
In recent months, Russia’s export earnings have fallen: both sanctions and oil and gas prices, which have fallen compared to last year on world markets, are to blame. Exporters’ foreign exchange earnings have also declined as companies are actively switching to ruble settlements. Last year, the authorities ordered Russian companies to sell 80% of the foreign currency they earn. Thus, exporters created an additional supply of currencies on the stock exchange, strengthening the ruble. But now our companies have much less money to sell. At the same time, imports, on the contrary, are growing – new channels for the supply of goods from abroad have been established. To buy them, importers need more currency, which is clearly not enough, so the dollar, the euro, the yuan, etc. inside Russia are rising.
The budget deficit and the signals that came in early August from the Ministry of Finance and the Central Bank also played a significant role in the weakening of the Russian ruble (see “Actually”).
WHY DID OUR CURRENCY STRENGTHEN IN THE LAST YEAR?
A year ago, the situation was reversed: Russia’s income from the export of resources is high (oil, gas, metals and fertilizers were very expensive then), hence the excess of foreign currency in the country. Imports, by contrast, fell (it took companies several months to set up new supply chains from abroad). Hence the sharp rise in the ruble exchange rate last summer.
HOW WILL PRICES GROW?
In recent months, inflation in annual terms has been at the level of 3-4%. But now it will surely be higher (see “Forecast”).
The price of different goods increases in different ways. After all, many factors affect retail prices.
– First of all, what will be imported from abroad will be more expensive, – financial analyst Mikhail Belyaev explained to kp.ru. – These are consumer goods and what the industry needs: components, machine tools… After them, everything else will rise in price.
What exactly are we talking about?
Car prices clearly follow the exchange rate
Photo: Shutterstock
– CARS
Price increase forecast: +15-20%.
Such a figure is called, for example, in the Avtodom group of companies. Although a number of experts believe that there has already been an increase and a sharp increase in car prices, it is still not worth waiting for. They say competition won’t let manufacturers and sellers raise prices too much.
– Car prices clearly follow the exchange rate, – says Anton Shaparin, vice president of the National Automobile Union. – But the fall in the ruble exchange rate, which occurred, is already reflected in current prices. It is true that we do not know when the fall will stop.
-HOUSEHOLD APPLIANCES AND MOBILE PHONES
Price increase forecast: +7-8%.
Here, the change in the ruble exchange rate is usually not reflected immediately, but with a delay of 1.5-2 months.
“But in the current situation with parallel imports, when suppliers do not set the cost of goods in the contract, prices can change faster,” explains Eldar Murtazin, lead analyst at Mobile Research Group. – True, it all depends on the category of goods. Thus, the expected increase in prices, for example, of mobile phones is 7-8%. Regardless of the country of origin. The cost of models whose suppliers work in Russia will rise a little less – they have decent stocks in warehouses. These are, for example, the Tecno and Xiaomi phones.
-PRODUCTS
Price increase forecast: +8-10%.
“And why should food prices go up because of the growing dollar?” – you ask.
– Inflation is a river that fills all branches, backwaters and tributaries during the flood, – says analyst Mikhail Belyaev.
Metaphors aside, however, an increase in the price of one category of goods leads to an increase in the price of another. For example, now, due to the appreciation of the dollar, imported components for the production of poultry meat and food for it are becoming more expensive. As a result, chicken prices go up. Buyers are switching to pork, and an increase in demand inevitably leads to an increase in prices too … In addition, the share of imports in the food segment remains large, and the depreciation of the ruble affects the price of the products. directly.
Products will rise in price at the rate of inflation for sure. Poultry, milk and most other food products will go up in price. In addition to fruits and vegetables, this is what the experts of the Romir research holding think. Prices in this category depend more on the breadth of supply in the market than on exchange rate fluctuations.
In the food segment, the share of imports remains large, and the depreciation of the ruble directly affects the price of products.
Photo: Timur Sharipkulov
– TRIPS ABROAD
Price increase forecast: +5-15%.
– Mass outbound tourism is largely not dependent on changes in the exchange rate, – says Ilya Umansky, vice-president of the Association of Tour Operators of Russia. – Demand and the number of offers play a role there. In other, less popular areas, tour operators work with existing offers that do not have much competition. Therefore, the exchange rate and the price of tourist services are here directly proportional.
Simply put, Turkey, Egypt and Thailand should not noticeably increase in price, and less massive destinations, for example, Israel, Indonesia, Europe, which is not very popular today, will increase the price as much as the ruble fell. In addition, the prices of transport to international destinations will increase: the increase in the cost of train and plane tickets can be up to 10%.
– In the domestic market, there will not be a large increase in the price in the future of one season, – the expert believes. – The balance of supply and demand, which has already been formed for the coming year, also plays a role here.
FORECAST
Inflation in 2023 could reach 10%
The Development Center of the Higher School of Economics (HSE) analyzed the current relationship of exchange rates and concluded that the weakening of the ruble will add 1.5-3% to annual inflation. And if in recent months inflation in annual terms has been at the level of 3-4%, by the end of the year, according to the center’s analysts, it will grow to 6%.
The HSE Development Center’s adjusted forecast is generally in line with the values forecast by the Bank of Russia. The Central Bank allowed inflation at the end of 2023 to be 6.5%. But the basic forecast of the Ministry of Economic Development was more optimistic: 5.3%.
Georgy Ostapkovich, director of the HSE Market Research Center, in an interview with kp.ru, suggested that only the current growth of the dollar would lead to inflation of 4%.
– This is in addition to expected inflation – warns the expert. From this we conclude: if the planned inflation is 5-6%, then the real one can be 9-10%. That is, by the end of the year, the average prices of most goods and services may increase around this figure.
IN FACT
Weak ruble helped to close the budget deficit?
contradictory statements
Recently, there has been a feeling that the Russian authorities are not very resistant to the depreciation of the ruble. For example, on August 7, the Ministry of Finance announced that it intends to buy foreign currency and gold, as it expects to receive additional revenue from oil and gas. And according to the current budget rule, excess oil and gas revenues should replenish state reserves, which are stored only in gold and foreign currency. This statement accelerated the fall of the ruble, and already on August 9, the Bank of Russia announced that it would not buy foreign currency on the domestic market until the end of 2023. Such a statement and decision could lead to the stabilization of the exchange rate, but on 11 In August, the Vice President of the Central Bank, Alexei Zabotkin, said at a press conference: “We do not fix the ruble exchange rate and we do not intend to announce actions on foreign exchange interventions (that is, the sale of foreign currency to maintain the ruble exchange rate. – Ed. )”.
It turns out that both the Ministry of Finance and the Central Bank gave signals: the state does not intend to seriously support the exchange rate in the near future. All this gave reason to suspect the financial authorities of a deliberate weakening of the ruble. The fact is that we now have a deficit budget – expenses significantly exceed income. The federal budget deficit for the first half of 2023 alone amounted to 2.6 trillion rubles, although for all of 2023 it should not exceed 2.93 trillion rubles.
One of the ways to get more rubles into the treasury is to reduce the exchange rate of the national currency. After all, it’s one thing when every million dollars received by the budget turns into 70-80 million rubles (at the rate of 70-80 rubles per dollar). And it is completely different when the same million is transformed into 100 million rubles (at the rate of 100 rubles per dollar).
– Now we have a deficit state budget, and in order to minimize the gap between expenses and income, it is necessary to devalue the national currency (that is, depreciate the ruble. – Ed.), – confirms Georgy Ostapkovich, director of the Center for Market Research of the Higher School of Economics. – True, this is beneficial for the state, the exporters, but not for the population. After all, with the depreciation of the ruble, inflation rises.
However, for the state, the weakening of the ruble is also not profitable in the long term. Yes, it will help patch the holes in the budget deficit at the moment, but rising inflation will again increase the burden on the budget: in particular, more money will be needed for social benefits, indexation of pensions, and wages. of state employees, etc. Therefore, in an uncontrolled depreciation of the national currency, nobody is interested.
What to expect next
In such a situation, everyone was waiting for the decision of the Central Bank to raise the key rate. And this happened on August 15, the rate immediately increased from 8.5% to 12% per annum. The interest on ruble deposits depends on the key rate, so the calculation here is clear: the higher the rate, the more profitable it is to keep money in rubles. As a result, the ruble really began to strengthen. It is too early to make any forecasts, but there is every reason to hope that the exchange rate will eventually return to a comfortable range of 85-90 rubles to the dollar. It is true that an increase in the key rate makes borrowing more expensive, which means it slows down the economy as a whole. But, as the heroine of the novel “Gone with the Wind” Scarlett O’Hara said, “I’ll think about it tomorrow.”
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