USD/RUB Rises Amid Mixed Economic Data, Wheat Taxes

The Russian ruble is continuing to pare its gains from the last month amid mixed economic data. But experts think that Russia will begin to recover next year, joining the rebound in the broader global economy. With a commodities boom, could Moscow see a dramatic resurgence over the next 12 to 18 months?

According to the Ministry of Economic Development, the gross domestic product (GDP) in November slumped 3.7% from the same time a year ago, marking the eighth consecutive monthly contraction for the energy-rich country.
Retail sales remained in the red last month, falling 3.1% year-over-year in November. This was the eighth straight monthly slide in retail activity.
The Federal State Statistics Service reported that Russia’s real wages edged up at an annualized rate of 0.5% in October, down from the 2.2% jump in the previous month. The reading also fell short of the median estimate of 1%. This is concerning news for the workers since the annualized inflation rate is about 4%.
But more workers are finding employment, with the unemployment rate declining to a five-month low of 6.1% in November. Still, it is way above the pre-pandemic level of roughly 4.6%.
Earlier this week, the Russian government reported that producer prices rose at a higher-than-expected rate of 1% last month, while industrial production declined by a smaller-than-expected pace of 2.6% in November.
On Friday, the Central Bank of Russia (CBR) held its final policy meeting of 2020, leaving interest rates unchanged at 4.25%. At a press conference following the meeting, officials warned that inflation is climbing above forecasts and could hit as much as 4.9% by the year’s end, before stabilizing at 4% sometime next year.
The World Bank released its latest report on the Russian economy, projecting that it would start to recover next year, but it faces trouble with financial institutions. Researchers say the GDP will grow by 2.6% in 2021, but only if new COVID-19 cases come under the best-case scenario. If not, the economy could only expand by as little as 0.6%.
In total, Russia has reported more than 2.74 million confirmed cases of the coronavirus, with a death toll of nearly 49,000. Moscow has been deploying its Russian-made vaccine, which has met some skepticism from foreign medical officials.
Deteriorating assets are weighing down Russian banks’ profitability in the corporate and retail segments.

The real extent of problem loans on bank balance sheets will start emerging by mid-2021, when the remaining regulatory forbearance measures will be lifted.

Pre-existing vulnerabilities such as a high share of non-performing loans combined with uncertainty about the length of the second wave of the pandemic and associated economic costs suggests that the worst still may lie ahead.

In other news, the Russian government is imposing an export tax on wheat to help the nation stabilize ballooning domestic food prices. The export levy will be established at 25 euros ($30.4) per ton, effective February 15, and it will be in effect until June 30. This export penalty is in addition to a grain export quota of 17.5 million tons over the same period.
The USD/RUB currency pair rose 0.76% to 73.4996, from an opening of 72.9825, at 17:04 GMT on Friday. The EUR/RUB advanced 0.39% to 89.89, from an opening of 89.50.
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Original from: www.earnforex.com