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Russian Ruble Will Outstay
December 10, 2008 17:39

Russia has all chances to overcome the financial turbulence almost unharmed.

The devaluation of the Russian ruble will speed up in the first half of 2009, Merrill Lynch said. However, experts expect the situation to reverse in the second half of the year: the dollar rate will fall while the Russian currency will strengthen. The Russian economy is likely to show a 3.7% growth in 2009 in case the cost of oil is fixed at $47 per barrel. On the other hand, $30 per barrel will mean an economical decline for the country, which will be at the end of its money resources in 2010.

Still, Russia will survive the crisis, if Russian officials bring an efficient business model of living under severe market conditions to the table.

A full-scale recession is in progress in the Euro zone and in some developing markets of the Middle East and Africa. Russia and the Arab States of the Persian Gulf are capable of taking the economic decline under control, states the report by Merrill Lynch. The bank has to lower the forecast on oil prices in 2009 to $50 per barrel.

Providing the price of $47 per barrel of Urals blend Merrill Lynch presumes one of the two scenarios to take place: Russian GDP may show a 3.7% growth, if Fortune favours or Russia, or increase only 0.1%. The Russian budget 2009 approved by the Russian government is based upon the average oil price of $95 per barrel and balanced at $70 per barrel. In both cases the devaluation of ruble is inevitable in the first half of 2009 the national currency rate will drop to 32.68 rubles per US dollar and 36.6 rubles per Euro. $30 per barrel will make the ruble rate plunge to 42 rubles per US dollar.

Experts believe that all willing to convert rubles into dollars will do it in the next few months, therefore, a heavy outflow of capital followed by greater devaluation the ruble is expected in the first half of 2009.

The World Bank says the ruble rate will not slump sharply but decline slowly Russian Prime Minister confirms this fact as he relies on the international reserves our country has been saving up for several years.

In the second half of 2009 Merrill Lynch forecasts the US dollar devaluation and a good start for the ruble to catch up: by the end of June the Russian rubles exchange rate against the dollar will be 27.97 rubles per dollar.

The financial crisis is a test for the current Russian authorities, who know how to play when oil prices are hot. This time they should learn to act efficiently not backed by expensive hydrocarbons.


Olga Pletneva


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