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Global Cataclysms that will Hit Russia and the Ruble in the New Year
December 30, 2019 16:19

Donald Trump, recession in Europe, US elections and instability in Latin America – these are the main risks, according to economists,  that Russia and the ruble may face in 2020.

The Russian economy is entering 2020 quite confidently in terms of resilience to external risks. According to Russian Economic School Rector Ruben Yenikolopov, problems in the global economy should not cause disasters in Russia, "because we have, first of all, large reserves." In 2019, the volume of Russia's international reserves for the first time since 2014 exceeded $ 500 billion. By the beginning of December, the gold and foreign exchange safety bag  had  reached $ 546.6 billion.

However, external risks can adjust the trajectory of the Russian economy. The Central Bank in its review of financial stability in early December indicated that the main risks for the Russian economy are associated with external factors - "exacerbation of trade and geopolitical tensions, a deeper slowdown in global growth, and a decrease in external demand for Russian exported goods."

Forbes asked economists to name factors on the global agenda that could cause the greatest losses to the Russian economy.

Trade wars

Yaroslav Lisovolik, head of Sberbank Investment Research: “One of the main risks of 2020 is the trade wars that have already affected the financial market and led to increased volatility in exchange rates. If trade wars continue, the situation will resemble a roller coaster: after a period of relative stabilization, an escalation of relations will follow, and a possible solution is not yet visible.”

Sergey Aleksashenko, former deputy chairman of the Central Bank: “The main risk for the global economy is a new round of trade wars due to the position of the United States or the inability of the WTO Court of Appeal to fulfill its role. Over the past 40 years, globalization has been the engine of economic growth, so the turn of politics from globalization to protecting our own markets back will inevitably slow down global economic growth. For Russia, low growth is a serious risk, as this leads to stagnation in living standards.”

Tatyana Evdokimova, chief economist at Nordea Bank: “The main risks are associated with the continued slowdown in global growth, which was observed in 2019. The slowdown could be triggered by new rounds of escalation of trade wars, the tension over which has slightly decreased over the past few months. For Russia, this scenario is unpleasant in that it limits the potential for rising oil prices and also impedes the achievement of the goal of increasing non-oil exports due to weak external demand.”

Andrei Movchan, investment manager, founder of Movchan's Group: “The growing conflict between the US and China in the trade area will lead to a stronger slowdown in the global economy and lower resource costs, but it is unlikely that oil prices will fall below the cutoff level by the budget rule. Neither Washington nor Beijing will benefit from a strong trade conflict.”

Slowdown in the global economy and recession in the US and EU

Yaroslav Lisovolik: “Among the more dramatic options is the risk of a significant slowdown in the global economy and the global recession. The IMF baseline scenario assumes the lowest growth rate for 2020 in 10 years - 3.5%. A slowdown in the global economy will weaken external demand for Russian energy, which will slow down the Russian economy and increase capital outflows. Most likely, in 2020, the global economy will slow down without a sharp subsidence and slide into recession. In the US economy, dependent on consumer demand, the situation is likely to remain favorable. For the European economy, Brexit will be a significant factor. For China, the main risk factor remains the debt of the state and corporate sectors.”

Valery Chernookiy, Russian Economic School professor: “Trade wars between the USA, China and the EU, Britain’s exit from the European Union, structural and debt problems in the Chinese economy threaten to reduce global trade. The economies of Germany and Italy are already balancing on the brink of recession. And although a scenario of an acute financial crisis like the 2008 crisis remains unlikely, a slowdown in the global economy could lead to lower demand for Russian exports and lower prices for oil and other raw materials.”

Maxim Buev, Vice-Rector of Russian Economic School: “It is highly likely that in 2020 we will finally see the beginning of a recession in Europe or the USA, which can adjust the trajectory of the economy.”

Tatyana Evdokimova: “A serious risk is the British exit from the European Union without an agreement that can significantly slow down the global economy. But the likelihood of such a scenario has recently decreased.”

Turbulence in Latin America

Tatyana Evdokimova: “A number of currencies of developing countries may come under pressure. Recently, instability has been especially noticeable in relation to Latin American currencies, in connection with protests and the pre-default state of Argentina. In the case of a significant weakening of the currencies of Latin America, capital outflows from emerging markets may occur, which may become a moderate negative for the ruble.”

Andrei Movchan: "There are risks of problems in Latin America that can lead to a significant correction in the financial markets, which will provoke the leaving of non-resident investors from the Russian market and affect the value of the ruble."

US Presidential Election

Oleg Shibanov, Russian Economic School finance professor: “One of the risks will be the US presidential election. Donald Trump spent a controversial but economically successful four years: unemployment is very low, the stock market has risen significantly. As a result, his chances of remaining in office seem rather high. However, Trump’s second term is likely to be less economically strong, although the president may continue tax reforms and changes in the labor market.”

Ruben Yenikolopov: “It is precisely because of the US elections that the likelihood of a crisis in this country starting in 2020 is rather low.”

Oil price dynamics

Yaroslav Lisovolik: "Oil prices may drop to $ 55 per barrel."

Sergei Aleksashenko: "Falling oil prices are the main risk for the Russian economy: this will cause inflation and a new round of falling incomes."

Andrei Movchan: “The geopolitical risk of aggravation of relations in the Middle East associated with relations between Sunnis and Shiites can turn into an economic risk, as it will lead to an increase in oil prices. But for the Russian economy, this risk can be a positive growth factor.”



Author: Anna Dorozhkina

Tags: Russia International Russian economy    

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