Interesting Financial Times piece on March 1 on the weak ruble but it skirts around the issue:

How about just spelling it out - the ruble is weaker because of Putin’s failed invasion of Ukraine and sanctions. There is some dribble in this article suggesting the weak ruble does not reflect long term fundamentals - of course it does. It’s not as though the long-term outlook is any better as long as Putin remains in power and continues his disastrous policies.

This year looks to be much more difficult for the Russia economy as:

* Sanctions crimp energy and commodity receipts - the oil price cap is really hurting. And you can see it in both budget and trade data where energy related receipts are lower by 40-50% YOY.

* Defense spending and increased social spending to keep war veterans and their families quiet will massively boost spending. Putin will have to make guns versus butter choices.

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* A weaker ruble - needed to help keep the ruble value of oil revenues elevated to keep the budget in check will spur inflation and resulting higher policy rates will crimp real GDP growth.

Sanctions will work over the longer term to depress the Russian economy limiting his ability to rebuild the Russian military. It is essential they remain in place.

 

Reprinted from @tashecon blog. Read the original here.

The views expressed are the author’s and not necessarily of Kyiv Post.

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