It has been a torrid time of late for the Russian economy, as the fallout from Ukraine and tumbling oil prices have plunged the country into financial crisis.
However, an unexpected recent rebound by the ruble has partially reversed months of pain for the national currency and fired hope among officials in Moscow that there might be light at the end of the tunnel.
Few analysts were betting on a bounce after the ruble lost over 40 percent of its value last year and carried on the slump into this year. However, a drop in fighting in east Ukraine and the steadying of oil prices seems to have combined with the tax payment season and a Kremlin drive to get money repatriated to fire an unlikely recovery.
Since briefly hitting a low of about 80 rubles to the US dollar and 100 rubles to the euro in December last year, and sparking panic among Russians, the ruble has now climbed back to about 57 rubles against the greenback and 62 rubles to the euro.
“The economic situation is still complicated, but we are seeing some significant signs of stabilization,” Russian Minister of Economic Development Alexei Ulyukayev said in a rare upbeat statement this week.
With things starting to look up, Ulyukayev predicted that the drop in GDP this year could be less than the 3 percent that is officially forecast — still dire, but not as bad as feared.
Inflation has reached a high of about 17 percent, but has also appeared to stabilize of late and the finance ministry is already claiming that the recession could be over by the third quarter of this year.
VTB24 analyst Timur Khairullin said that the ruble’s “firm dynamic” was being bolstered by both external and internal factors.
Among them is the fact that the time for firms to pay their taxes in the nation has only just passed, meaning there has been a spike in demand for the ruble.
Also Khairullin said the bump could have been helped by the promise by Russian President Vladimir Putin of an amnesty — now being considered by parliament — to try to encourage vast sums being stashed overseas to be repatriated to Russia.
Capital Economics analyst Neil Shearing said that the most important factor has been the “stabilization and then rebound in oil prices,” but added that the extent of the ruble’s earlier plunge was likely an overreaction in the first place.
“The ruble probably overshot to the downside during the sell-off before Christmas. Some form of correction was always likely and now that strains in the financial system have started to ease that has come through,” Shearing said.
Despite the recent rise, Shearing warned that unless oil prices pick up even more then “it’s difficult to make the case for a sustained strengthening in the ruble.”
“The economy is sliding into recession, elements of the banking system remain vulnerable and financial sanctions remain in place,” he said.
As calm returns to the Russian economy after the panicked turmoil of late last year, some analysts said that this would give authorities breathing space to fend off the worst.
The steadying of inflation meant that, for the second time in a few months, the central bank was able to cut its key interest rate after a monster hike in December last year.
“Effectively there is a recession, but it is not as deep as we anticipated,” Alfa-Banks JSC’s Natalia Orlova said. “The crisis of confidence isn’t getting any worse, and that is good news.”
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