Despite the predicted deterioration in economic indicators, Russians should not be afraid of the devaluation of the ruble in 2020 in Russia, as many experts and analysts are sure. In their opinion, given the fact that the Ministry of Finance plans to gradually increase the volume of purchases of foreign currency in the domestic market, there are practically no real prerequisites for the development of such a scenario even in the event of a further drop in oil prices and tougher sanctions.
Ministry of Finance Policy
The population does not trust the national currency, and citizens are increasingly asking themselves whether the devaluation of the ruble in 2020 will be in Russia. And this position has good reason: consumers have repeatedly lost their own savings due to the sharp depreciation of the ruble, so many want to prepare for the next fluctuation in the value of currencies. The current policy of the Ministry of Finance, which is forced to enter the domestic market and buy foreign currency to form the National Welfare Fund, clearly contributes to such sentiments. And although this is necessary in order to balance the budget in the conditions of its deficit, the question remains whether the government is ready to take risks and accelerate the pace of fund formation, which will inevitably lead to devaluation and weaken the ruble.
However, experts believe that through trial and error, the Ministry will nevertheless be able to achieve a certain balance at which it can systematically replenish the fund without undermining the faith of Russians in the national currency. Under the conditions of external sanctions and a decrease in the cost of oil, when it is necessary to reduce, rather than stimulate the dollarization of the economy, using all available methods, this is clearly not in the interests of the government, which is interested in covering the budget deficit and overcoming crisis phenomena.
Prerequisites for devaluation
Analysts are not yet ready to give a final forecast regarding the likelihood of depreciation of the Russian currency. But at the same time, they believe that in 2020 such factors can contribute to this:
- Reducing imports and increasing exports. First of all, this concerns the sale of petroleum products on international markets and the cost of "black gold", which in the long term may decrease slightly. It is no secret that the key source of replenishment of the budget of the Russian Federation is foreign exchange earnings from the sale of oil, which means that if the cost decreases, the government will have to look for an alternative source of replenishment of the budget to cover its deficit. Despite the reduction of a number of social programs subsidized by the state, in 2020 this may not be enough to solve the problem. And in order to make up for the deficit, the government will be forced to “turn on the printing press,” which will depreciate the national currency with every circulation. The only way out of this situation is to use the available mechanisms for managing the devaluation process: then even in such conditions it will be possible to restore the balance of payments, supporting domestic exports.
- A sharp increase in inflation, which will inevitably lead to devaluation. But, if you are guided by the official forecast, such a risk is minimal and in 2020 inflation will not exceed 4%. At the same time, if economic sanctions intensify, the real indicator may turn out to be higher than the declared one, although Russians still should not be afraid of a sharp decrease in the value of the ruble, for which even in such a situation there will be no prerequisites (only a “mild” devaluation is possible).
- Panic in the financial or foreign exchange market. Any political events that occur in the world directly or indirectly affect the Russian economy and the position of its citizens. A similar development of events could be observed in 2014 and early 2018.
Consequences of devaluation
Answering the question of whether devaluation is possible in 2020, it is worth noting that even in the event of such a development of events, the Russian economy can benefit from this. In particular, this will be due to the fact that:
- The cost of foreign goods will increase, and this will contribute to an increase in demand for products from domestic producers, which due to devaluation will receive an additional competitive advantage to increase sales.
- Companies will be forced to explore other areas for export, and risk diversification will be achieved. Even taking into account the fact that it will take some time to change the export policy, a lot of benefits can be gained from this later.
- Reducing the consumption of gold and foreign exchange reserves. To provide subsidized payments, the government will sell the accumulated currency at a better price.
On the other hand, if, contrary to analysts' forecasts, in 2020 the Russian economy will have to face devaluation, this will result in it not only a decrease in the level of public confidence in the ruble, but also an increase in prices on domestic markets. The most difficult situation will be for enterprises whose activities are directly dependent on imports: they will be forced to look for other markets for the purchase of products and components, reduce workloads, lay off employees and look for other ways to optimize their business costs (up to a complete stoppage of production). And citizens who receive income in the national currency will feel a decrease in their solvency and will more often refuse to purchase imported goods in view of their high cost.