“Tense relations between various countries are setting the tone for national currencies. While the Turkish lira is an excellent example, as reflected in recent turmoil triggered by a diplomatic spat over an American pastor detained in Turkey, the Russian ruble is also driven by growing tension between the US and Russia,” Rabobank EM FX Strategist Piotr Matys notes.
Key quotes
“In terms of the long-term outlook for the ruble and the Russian economy, the US sanctions may perhaps provide a stronger incentive to accelerate the pace of economic reforms. There are encouraging signals on that front.”
“The government proposed to raise the retirement age gradually to 65 for men from 60 by 2028 and to 63 for women from 55 by 2034. This politically unpopular decision reflects the determination to strengthen public finances by addressing fiscal issues related to the aging population and could result in a rating upgrade.”
“In order to increase potential GDP growth and improve living standards (President Putin aims to raise Russia’s GDP per capita by 50% by 2024), it is essential to implement structural reforms which would substantially boost productivity. Improving the business climate by reducing corruption, strengthening the regulatory framework and further reducing reliance on global demand for oil and gas would also contribute to well-balanced and sustainable growth over the long-term horizon.”
“We are cautiously optimistic that the government in cooperation with the President and the parliament will make progress on economic reforms in the coming years. This is reflected in our long-term FX forecast that envisages USD/RUB trading at around 50 level in 24-36 months.”
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