The Fall of Ruble is Inevitable: Better to Keep Savings in AMD

• 08.21.2015, 18:12
• Lilia Amirkhanyan
•  EEU,  World,  Armenia,  Analytics

The rate of ruble continues to fall. The value of the Russian currency against the dollar has risen to 65.50. Although it is conditioned by the stagnation of the Russian economy, the inflation of the Russian ruble is an alarm both for the Russian business entities and the countries directly or indirectly connected to the Russian economy such as Armenia.

Let’s first of all try to reveal the causes of such kind of inflation. The causes can be categorized in two groups external and internal.

When the rate of national currency continues to fall along with negative predictions, one can assume that the internal mechanisms for the given economy have been wrong and resulted in the so called “economic bubbles.”

The Russian economy today is in a condition when internal economic protective measures are necessary to save the economy of the country. Those measures are state guarantees for national currency and the use of the reserve funds as a “lifebelt.” In the essence those are cause and effect processes. According to Russian sources country has no reserves to keep the national currency stable. The existing funds will probably be used when the fall relatively stops to try to keep currency inflation predictable.

What refers to external factors then it won’t be rude to say that the Russian economy is today in unique isolation. If we  try to present the situation on the practical ground  then we are to speak of the situation when no international product enter Russian market as a result of which the demand for ruble circulation sharply falls, while the circulation continues. In the Russian market today supply of ruble exceeds demand as long as there is no demand for purchase of foreign currency by ruble. Consequently the extra supply results in the fall of prices. On the other hand, in the presence of the external factors the speculations in the market also affect the rate of ruble which is the most vulnerable to any type of change.

In reality among Russian experts there is often expressed opinion that the fall of the ruble rate and the yuan is interconnected. This kind of connection at present can be viewed to the extent the currencies of the two trading partner countries can be interlinked.  This means that it is a result of coincidence.

It is another question how will the fall of the Chinese yuan or any other change in the Chinese economy affect Russian economy taking into consideration the fact that China is the largest export market for Russia. This is the issue which is still early to discuss as long as the negative effects of the Chinese economy on Russian marker are still in the initial stage.  

Coming back to the causes of the present rate for ruble, we cannot circumspect negative predictions. It is not a secret that the Russian market directly depends on the world oil prices. It is not a secret either that the prices of oil have been continuing to fall for several months. Consequently, all the predictions that the black gold will no more have its previous value seem to be quite real.

It the context the factor of Iran should not be ignored either. Rich with oil resources Iran which will soon enter the international market is to cause the new strong wave of falling oil prices. According to approximate calculations this will happen in autumn which should become another alarm for those who deal with ruble.

Of course all this will also affect the Armenian market. The fall of the ruble rate affects a large segment of the Armenian population. The devaluation of the transfers coming from Russia is directly proportional to the level of well being and the indicator of the economic activity in the country. Naturally the negative impact will be short lived for business entities.  In the long-term perspective even if ruble rate get even lower but become stable, it will be possible to gain benefits by raising the value of the national currency.

However, for the present everyone is better to keep savings in AM drams, as long as ruble is still to continue falling for a long time.