The ruble case provides in Russia and outside the greatest country on earth for much nervousness. The Russians keep their currency currently for sale significantly below market price. But how bad is it really? The causes and consequences of the currency crisis in the overview.
The Russian ruble falls through the floor. Not even a radical interest rate hike by the Russian central bank has not changed. Also on the Russian equity and bond markets temporarily went wide panic, the Russian government seems in the ruble crisis to panic: The Ministry of Finance has started on Wednesday so that its foreign currency reserves to sell. Thus, Moscow wants to stop the falling ruble exchange rate.
Despite different causes reminds the situation to the heavy ruble crisis in 1998.
What are the main reasons for the decline of the ruble?
Loaded is the ruble mainly due to the decline in crude oil prices. Meanwhile, the decrease amounts to about 45 percent since the summer. Energy is the most important export product of Russia. The sanctions imposed by the West because of the conflict in Ukraine, the Russian economy have taken extra hard. The Russian ban on imports of food from the European Union also pushes prices up in Russia. Higher inflation weakens the currency further.
the Russian economy How hard is affected?
Regardless of the fall in oil prices has lost the Russian economy in recent years momentum. The planned modernization made little progress according to experts. For the coming year, the Russian central bank fears a recession and even speaks of a possible slump in the economy by up to 4.5 percent.
How does the ruble decline in Russia?
Imported goods are covered by the exchange rate rapidly becoming more expensive. The rising inflation rate charged to Russian consumers. Also investment from foreign companies in Russia are becoming less attractive. Capital flight has increased significantly recently. For loans of Russian companies launched in other currencies, the repayment will be more expensive. Above all, the banks have high foreign debt. In addition, higher interest rates, they are bad for the economy.
Video: rubles in free fall – Russia Threatens the next state bankruptcy?
Can you compare the situation with the Russian crisis of 1998?
16 years ago, the Russian government could not defend the artificially set longer ruble and had to go to the following sharp depreciation of the currency to repay foreign debt expose. On August 26, 1998, the ruble exchange rate fell against the US dollar on a day to 26.59 percent. Even then loaded a lower crude oil prices, the Russian economy. Unlike today, but Russia was deeply in debt and had deficits in foreign trade. However, the relationship with the West was much better than today, and the International Monetary Fund (IMF) granted emergency loans. Thanks to the growing commodity exports, the Russian economy had recovered from the year 2000.
Russia threatens national bankruptcy?
The central bank operated in early December on foreign exchange reserves worth even 416 billion US dollars. Although they have since fallen further, but defaults initially appear unlikely. The national debt is in relation to gross domestic product by 13 percent in international comparison very low. In the US, the debt is 108 percent. With the decline of the ruble risk premiums on Russian bonds, however, are higher, and the refinancing of government is more expensive.
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