The Minister of Finance of Russia, Anton Siluanov, said on Thursday that the currency crisis is over, as the ruble firmed in a maximum of three weeks on Thursday. However, Russian President Vladimir Putin told his ministers that they need to work in the coming days to administer the deep economic problems of the country.
The recent recovery of the ruble after the government and the Central Bank announced strong measures to stabilize the market – eased fears about a financial crisis spiral in the country. At the same time, the sharp increase in interest rates announced by the monetary authority last week to contain the collapse of the ruble, along with growing problems in the Russian banking sector, dramatically worsened the outlook for Russia’s economy.
Just two weeks after sorting forecasts that the country will have a mild recession next year as “very dark”, the Ministry of Finance revised its outlook for a drop of up to 4% of gross domestic product (GDP) next year if oil prices remain around current levels of $ 60 a barrel, undermining Russia’s economy, along with Western sanctions.
The projections of the Ministry are that this scenario , spending cuts of 10% that the government is considering will not be enough to prevent the budget pass to record a deficit, according to court documents seen by The Wall Street Journal. With the financial markets closed West, deficit financing would force Russia to drain most of its special funds for turbulent times, built when oil prices were high.
Putin, who has minimized publicly the gravity of the economic crisis, made on Thursday a parallel with the 2008-2009 crisis and urged the government to step up efforts to solve economic issues in the short term. “Why do I talk about the near future? Because there vacation now and they are quite long. And people have the right to rest … But for the government and its departments, we can not give these long weekends, at least in this year, “Putin said.
If the Ministry of Finance drain the reserve fund, the country’s international reserves, which fell this week to less than $ 400 billion for the first time since 2009, will decrease. Moscow needs its international reserves – the fourth largest in the world – to protect yourself from a fall in the ruble and fill budget gaps. This month, Russia has spent about $ 11.2 billion to relieve pressure on the local currency, which reached a low of 80.1 rubles per dollar last week. However, the ruble reduced share of losses since.
After losing about 50% of its value against the dollar in the previous weeks, the ruble gained strength in the last five days of operation of the market as oil prices have stabilized and the month-end tax payments occurred.
“We believe now that period is over, the period of instability. We think that the ruble is still undervalued with the current price oil, “said Finance Minister Anton Siluanov, according to Russian news agencies.
The Russian currency rose about 1% to 52.9 rubles per dollar during a quiet session today , as exporters converted their oppositions in US currency for rubles to paid local taxes that are due at the end of the month. Source: Dow Jones Newswires
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