Page 77 - RusRPTFeb21

7.0​ FX
RUSSIA -FX
2016
2017
2018
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
4Q20
Currency (units per EUR) (eop)
64.8
68.9
79.5
79.5
72.9
72.1
71.5
69.8
76.3
78.9
75.0
76.7
Currency (units per USD) (eop)
61.5
57.6
69.5
69.5
64.8
64.3
64.7
63.0
69.3
71.7
68.0
69.7
Currency (units per EUR) (average)
74.4
65.8
74.0
76.1
75.1
72.6
72.0
69.7
73.3
79.5
74.1
75.6
Currency (units per USD) (average)
67.2
58.4
62.7
66.7
66.1
64.6
64.7
62.9
66.5
73.8
67.7
69.3
source: CBR
The Russian ruble is clearly undervalued from a fundamental viewpoint​. We estimate that the prevailing $/RUBrate incorporates a geopolitical risk premium of 10-15%. However, it looks like geopolitical factors will continue to weigh on the ruble, so we have downgraded our forecast and now expect it to average 72 against the dollar this year. Another factor likely to weigh on the ruble in 2H21 is an expected rebound in outbound tourism if vaccinations prove effective and the Covid situation improves globally. Should things play out like this, we would expect a current account surplus of $50bn in 2021.
The ruble looks excessively weak from a fundamental viewpoint. The Big Mac index, purchasing power parity, and both short-term and long-term econometric models all suggest the ruble is undervalued.
Outbound tourism likely to recover in 2H21. If global vaccination programs prove effective and outbound tourism recovers, imports of related services could surge to $14bn in 2H21 from just $2bn in 2H20.
Our optimistic scenario has the ruble averaging 68.3 to the dollar. This was our previous base case. The stronger ruble in this scenario (5.4% stronger than in our new base case) stems from the capital outflow coming in $14bn lower than in our base case this year, which would reduce the current account surplus to $36bn.
77 ​RUSSIA Country Report​ February 2021 ​ ​www.intellinews.com