Today we will tell ourselves what perspectives are for ruble and currency from both friendly and alleged hostile countries. There will be much about the fresh central bank study informing of the crisis and the 9th wave of inflation.
At first, however, let us decision to the Moscow Stock Exchange. In May, the volume of trading in major currencies was over 6.1 trillion rubles($75 billion). Investor activity in the yuan continues to increase, where the volume of turnover increased by 17%, to 2.49 trillion rubles (30 billion USD) and the share first exceeded 40%. That's 17% more than in April. .
Note, however, that the full volume of yuan trading is inactive lower than the volume of U.S. dollar trading, which in May besides saw an increase, albeit modest, reaching a turnover of 2.55 trillion rubles($31 billion), or 2.4% more than in April. The US currency occupies over 41.5% of the market.
The share of euro trade in 1 period fell by almost 15%, to 1 trillion rubles (US$12 billion), which represents 16.7% of the volume of currency trading. A strong decline in euro turnover is linked to a drastic and expanding decline in trade with EU countries. China has taken the place of a key trading partner so far. However, this exchange is not beneficial for Russia. The Chinese currency is dependent on a popular Chinese bank and impervious to political influence.
Trade turnover between Russia and China increased by 40.7% year-on-year, to US$93.8 billion in January-May, reported the General Customs Administration of the People's Republic of China. Exports from China to Russia increased by 75.6%, to $42,95 billion Imports of Russian goods and services increased by 20.4%, up to $50.85 billion, reports TASS for customs data. This means that the trade surplus has reached US$7.9 billion and Russia is already 1 step distant from the trade balance deficit between countries.
Let us remind that at the end of 2022 the full Russian trade surplus amounted to $227 billion, where the EU and China represented an overwhelming majority. The current EU trade balance has recorded a modest deficit of EUR 0.2 billion, and in the coming months we will have a akin effect for China.
Russia, on the another hand, has a immense surplus in trade with India. But that will not be good news. The surplus is mainly worked out in rupees and is due to erroneous agreements of the Putin government placing on national currencies. We see a return to the dollar here, but it's a slow process, torpedoed by the Russian government.
Budgetary gross from oil and gas is very bad. In the 5 months of 2023, they fell by 51%. to 2,853 trillion rubles ($35 billion). In May 2023, the average Urals oil price was $53.34 per barrel, which is 1.48 times little than in May 2022 ($78.81).
The Ministry of Finance explained the fall in oil and gas gross at a advanced price last year, the fall in Ural price quotations in 2023 and the decrease in natural gas exports.
The Ministry of Finance inactive foresees a revival of taxation revenues from the oil sector in the second half of the year. This will facilitate the definition of the base of oil taxes and reduce the discount on oil. The presumption is based on the blind I believe that China will have a strong economical recovery and consequently there will be a very strong request for oil. The prices of natural materials in this script will pierce the price of $100 and Russia will return to the situation from 2022. It forgets the immense Chinese oil reserves.
Note that the emergence in oil prices is very much needed due to the fact that the avalanche costs are increasing. True, the government is trying to hide and book many of them in the coming months. And so officially the defence spending was 60% planned for the full year, unofficially the figures are twice as high. The government is presently trying to limit transfers to regions by retaining any of the cash in central accounts. In the cash register, for a moment, the difference between expenses and revenues will be twice.
Government and regions will save themselves from borrowing internally, and there are theoretically favorable conditions. The current level of regional debt remains 1 of the lowest in the last 10 years: at the end of 2022 it was 20.9%, The Russian government boasts that in his case this rate does not exceed 16%.
In this context, without a sharp emergence in oil prices, the increase in interior debt in 2022 and 9 inflation waves is expected.
This is the view of the central bank, which sees the causes of inflation growth in the hold between production dynamics and request dynamics. To prevent inflation from accelerating, the Russian Bank proposes in its latest study to strengthen monetary policy and cut spending.
Reverse action is proposed than government action, i.e. limiting credit shares and consumption.
The simplification is intended to affect the attractiveness of loans to grow production and to increase the amount of wages paid.
This is due to the fact that present We observe an increase in the salaries of employees of companies carrying out increased public procurement. In addition, we besides have an increase in consumption as a consequence of payments under military service contracts.
There is simply a strong dispute here between the Central Bank and the Ministry of Finance.
The Bank of Russia in its paper advises the Ministry of Finance on the request for a more conservative fiscal policy. Worse still, between the lines, it is recommended to destruct the underlying origin of the increase in budgetary expenditure for the financing of military operations.
On the another hand , the proposed tightening of monetary policy without major changes will aid to reduce the production activity of the private sector and further reduce the stableness of the Russian economy .
As we see, there is simply a decision-making way between 2 centres of power.
Failure to comply with the changes proposed by president Elvira Nabiulina will lead to a permanent difference between the supply of money and the supply of goods in the short term, which we know is the classical origin of inflation.
The Russian economy has reached a state where there is simply a steady expanding hazard of falling into a barrdzo acute crisis. It may appear not only on the commodity marketplace in the form of a sharp increase in inflation, but besides on the abroad currency marketplace in the form of a devaluation of the national currency and on the public debt marketplace (the second is almost certain).
Financial regulators no longer have manoeuvres available to reduce the imbalance between money and goods Monetary policy measures are incapable to halt the fundamental origin underlying the emergence in this imbalance. The solution lies in fiscal policy, which means that budget expenditure should be reduced. But specified a decision can only be made if there is simply a political decision to control from military to diplomatic.
. So we're back to the postulate I've been talking about for over a year. Freezing conflict at all costs and reducing military spending. However, in that case, it will be the price of specified a decision. Returning to civilian production in many cases can be impossible without external assistance.
In specified a situation, the possible for a ruble on 2023 is not good. The gap between the Central Bank and the government will increase. Putin's 2% GDP growth does not make the situation any easier. Infrastructure expenditure and, above all, military expenditure will proceed to increase.
In June, the situation in the currency marketplace is saved by companies forced by the government to pay dividends. due to the fact that a dividend is simply a ruble company must sale accumulated mottos. However, the situation will deteriorate in the summertime to become critical in the fall. It is then that we can observe the crisis script against which the central bank is alerted and the strong request for mottos along with the panic rerun of April 2022.
There are inactive very narrow possibilities that the government can perform, but I was not to suggest, nor will I.
The article was based on statements by Russian economists of Kommersant articles, Moscow Times, RBC, and Telegram channels.
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