"The market is afraid of something." Ruble and Russian national debt collapsed against the backdrop of Putin's election .
The Russian foreign exchange market met the next presidential election with a noticeable fall in the ruble exchange rate.
At the Moscow Exchange on Friday, March 15, the dollar rose in price by 1.18 rubles, or 1.29% - the highest value in more than three months. The euro added 1.42 rubles and reached 101.22, the highest since the beginning of January.
At the end of the week, the dollar rose in price by 2.5% - a record since August last year, and paired with the euro, the ruble experienced the worst week since December (+2.3%).
"The market is clearly afraid of something," writes Evgeny Suvorov, an economist at TsentroCreditBank and author of MMI. A popular version, he notes, is that after the elections, "the ruble will be released": the Central Bank and the Ministry of Finance will reduce or stop selling foreign currency from reserves, with the help of which they "brought down the temperature" of the ruble in the fall, when the dollar soared above 100 rubles.
Along with the ruble, Russian government bonds, with which the government closes the budget deficit, are falling. On Friday, the RGBI index, which reflects OFZ quotes, collapsed to its lowest since April 2022 - 116.03 points. Yields on all debt securities of the Russian government jumped above 13%. And the sell-off was accompanied by increased trading volumes of 12-18 billion rubles, says PBS analyst Dmitry Gritskevich.
"Pressure on the ruble continues to be exerted by a probable reduction in exports in quantitative terms," said Dmitry Babin, an analyst at BCS: against the backdrop of problems with settlements through banks in Turkey, China and the UAE, export revenues of the Russian economy rolled back to three-year lows at the beginning of the year. According to the Central Bank, the sale of goods abroad brought only $28.9 billion to the country, which is 14% less than a year earlier. The shortage of foreign currency "is exacerbated by increased budget expenditures, as well as the persistence of a relatively large outflow of capital abroad," Babin said.
At the same time, the market is afraid of additional budget expenditures, Suvorov points out: in his pre-election address to the Federal Assembly, Vladimir Putin made promises for 12 trillion rubles, which means that the authorities need to find and pour 2 trillion rubles of additional money into the economy annually.
Having failed almost all of the key promises of the fourth term, from poverty reduction to demography, Putin is going into the fifth with a new package of national projects, with which the government promises to achieve economic growth of 20% in six years.
But the key risk for Russia is uncertainty, said Sofia Donets, an economist at Renaissance Capital. The war economy lives off reserves, she points out, but this source is gradually nearing exhaustion: more than half of the $113.5 billion of the NWF's free money has been spent during the two years of the war – $57.6 billion.
Military spending is already eating up a third of the budget, which has never happened since the days of the USSR, but Putin does not plan to stop: he is preparing for a long war with the West and in his fifth term wants to reshape the world order according to his wishes.
Source
@freerussia_report
