Page 15 - RusRPTAug23

spending: MinFin data shows that in 5M23 nominal federal budget expenditures were 25% higher than in 5M22 and 49% above the levels seen in 5M21.
Ruble on a losing streak since December 2022. All these changes in attitudes coincided with some notable shifts in the dynamic of the ruble exchange rate. The ruble has been steadily losing ground since early December 2022 when Western oil price caps were put in place. There were two instances when this weakening trend was interrupted. The first occurred in late December 2022 – early January 2023 which came as a timely act of support to Russian tourists who traditionally travel abroad en masse during the Christmas holiday season. The second period when the ruble’s weakness was briefly reversed during early May – again, that coincided with another traditional period of mass holiday travel from Russia.
Belousov announces a new RUB80-90/$corridor for the ruble. Since mid-May the ruble’s weakening trend has continued without interruptions. On June 15th, during the St. Petersburg Economic Forum, First Deputy Prime Minister Andrei Belousov announced new trading parametres for the ruble – he said that in his view a trading range that is comfortable “for the Russian economy” lies in the RUB80-90/$corridor. That confirmed what was already seen as a new reality by the market. However, still, some hope remained that by late June, once the bulk of monthly and quarterly tax payments to the budget was complete, the ruble might bounce back to the levels around RUB80/$or below. However, that did not happen once the main tax payments were completed on June 29th, instead, the weakening of the Russian currency accelerated, and the ruble hit lows of RUB91/$and RUB99/€not seen since the end of March 2022.
Russian currency lost 50% of its value to a bi-currency basket in seven months. The best way to analyze the dynamics of the ruble exchange rate is by looking at its value to the $€basket. Such an approach helps to neutralize fluctuations in the $€currency pair. Our analysis shows that since early December 2022, the Russian currency has lost 50% of its nominal value to the bi-currency basket: if in late November-early December 2022, the ruble rate to the basket was in a RUB60-61/BKT range, by early July 2023 the rate dropped to RUB90-91/BKT. The last attempt to reverse this trend took place in late
15 RUSSIA Country Report August 2023 www.intellinews.com