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Economist: Ruble To Have Tough Time

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Economist: Ruble To Have Tough Time

The Belarusian authorities are again stepping on the old rake.

It seems that in 2018, Belarusians will not provide such a strong support for the currency market as in past years, and the pace of its fall will accelerate, financial consultant of TeletradeBel Zhanna Kulakova writes in an article for the "Belarusians and the Market".

Last year was the most successful for the Belarusian rouble of the three years that have passed since the transition from the administrative exchange rate system to the market system. The national currency weakened to the basket of the National Bank by a modest 6%. At the same time, due to a significant drop of the US currency at the international market, the dollar exchange rate in Belarus remained virtually unchanged by the end of the year.

True, the euro has risen in price by 15%, but few have paid attention to this. Historically, it was the dollar exchange rate that is the mainstay of stability for Belarusians and the main financial beacon.

Taking a closer look, you can notice some alarming symptoms that were not there a year ago. Many of them directly relate to the foreign exchange market.

For example, if in 2016-2017, against the background of a fall in real incomes, the population actively "ate" their currency stash, then in recent months, the volume of net sale of currency by individuals has decreased. Particularly distinctly the tendency began to be traced from the autumn of 2017, and already in December for the first time in two years Belarusians became net buyers of foreign currency. In January 2018, currency sales formally resumed, but in fact, citizens "worked" to zero: $ 37 million a month - it's miserable, because previously the population consistently sold $ 100-200 million.

A number of factors led to a change in the currency behavior of the Belarusians. First of all, the growth of wages. According to the official data, for the year of 2017 real wages increased by 6.2%. Hardly such a significant increase was actually earned, as labor productivity rose only by 3.6% in January-November.

It turns out that in the pursuit of "unconditional fulfillment of the instructions of the head of state," we step on the old rake again. Unjustified wage growth in Belarus always led to pressure on prices and exchange rates. If the population has an extra penny, it immediately buys a currency for it. It is naive to believe that citizens got rid of currency savings, because they stopped loving dollars.

In addition, the behavior of Belarusians could be affected by a fall in interest rates. On the one hand, it reduces the attractiveness of ruble deposits, on the other hand it increases the availability of loans. If an impoverished Belarusian, who needed a large purchase, had to choose between a loan at 30% per annum and the sale of dollars, now the situation is different. A little wealthy citizen can take a loan already at 10-15%, and this fundamentally changes the matter.

And the cookie jar money is not endless. Someone, perhaps, would be happy to sell the currency and buy something useful, but the stash was empty.

In a word, everything goes to the fact that in 2018 Belarusians will not provide such significant support to the currency market. Well, if the results of 2018 will turn out to be a plus, but it will clearly be less than in 2017 and 2016, when the population sold on a net basis, respectively, 1.8 and 1.9 billion dollars.

Without such support, the currency market will have a tough time. In previous years, due to the currency of the population, the net purchases of enterprises were fully covered and a considerable share went to the state, which replenished the gold and foreign exchange reserves and repaid debts. This is also a very important aspect: in the conditions of a small amount of gold reserves and an impressive national debt, the state is forced to buy foreign currency on the domestic market.

The current year will not be an exception: payments on foreign exchange debt will amount to $ 3.7-3.8 billion. At the same time, the sources of obtaining only 2.7 billion dollars (1 billion - gold reserves, 1.2 billion - new loans, 500 million - oil duties) have yet to be clearly identified. The fate of another $ 1 billion remains unknown. There is a high probability that most of this amount will be repaid in the domestic market for budgetary funds. Last year, it was possible to do this, this year such scenario seems unlikely.

The listed factors may lead to the fact that the weakening of the ruble in 2018 will accelerate. Perhaps, if by the end of the year the ruble weakened by no more than 10% to the currency basket, this would be a good result.

The external risks for the ruble are also preserved: we are still dependent on the Russian market and oil, and there is no insurance from external force majeure . However, now domestic risks for the national currency appear more worrying.

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