“Russia is a raw material for China”
Economist and financier Oleg Vyugin spoke about the consequences of the consequences, the prospects for the yuan as a world currency and the work of the new budget rule in Anna Kozhukhar’s studio on the RBC Investments YouTube channel.
The expert is confident that the economic damage will completely disappear next year. Commenting on the expected deviations, Vyugin of the economy, that the spring forecasts were more negative: “The model that everyone kept in mind was the full transfer model. In fact, this did not work out – no export of export. Unusually high revenue from the sale of energy resources in the first place, such revenue was not at all at all levels. Yes, imports have shrunk, but little by little Russian private entrepreneurs have found ways to slowly restore this import.” Problems related to the import of equipment and investment goods still remain unresolved. According to the economist, in the fourth quarter of 2022, the decline in GDP could be 7%. This sets a negative situation for the economy for the next year.
Russia will reorient exports from Europe to Asia, but does not intend to aim at maintaining the same volumes. “This is a high level of uncertainty, uncertainty is the worst thing in the economy. If everyone knows the rules of the game well (even if they are the worst ones), it is clear what needs to be done, how to do it and how close it is,” concludes the economist. First of all, uncertainty damages investment and consumption, which are factors of economic development.
In the theory of economics, it is applied, in particular, in Germany, a recession sets in. A reduction in the economy by a few percent will be seriously experienced by society, a few percent will be dramatic and will inevitably entail some consequences.
Investment in yuan
According to the expert, Russia’s turn to the Asian side is forced – “Russia is still a country of European culture.” This creates a number of difficulties: it is difficult for private business owners to arrange meetings with Chinese participants.
From an investment point of view, the Chinese markets are interesting for professional players. The dollar remains the main currency for the whole world, including for China. Japan is moving forward with this country. “For example, Russia is a raw material product for China. <...> And from this point of view it is necessary to understand well where our place is. We say: “Let’s invest in China.” Yes, they don’t need it. They need Russia to be a stable stable supplier of resources. In cases that arise, China is not yet interested in investing a lot in Russia, except perhaps to promote its goods,” the financier advises.
According to Vyugin, the yuan is a temporary investment currency for those who do not believe in the ruble and want to diversify risks. The dollar, in turn, maintains a stable relationship – central banks around the world keep reserves in dollars.
Ruble’s exchange rate
The economist highly appreciates the actions of the Ministry of Finance and the Central Bank in the current conditions: “They quickly realized that everything that was before will not be, because now the ruble and the price of money in Russia are a monopolistic balance or current balance. Falling imports and a large balance of payments surplus record of exports mean that the ruble will be very strong. Moreover, it can be so strengthened that it will not seem small. Attaching the ruble is the strongest disinfection factor. Actually, this is exactly what happened: after more than a 20% jump in inflation.”
Like the Vyugin economy, in the middle of summer, exporters bring into the country as much currency as is necessary to use the dollar exchange rate within 60-65 rubles. The course will continue at baseline until there is a balance between exports and imports.
New budget rule
“The essence of the budget rule is very simple: we will take into account all resources for current expenses. If you are suddenly lucky and they (income – ed.) will be more than 8 trillion, then we will really save a part. But, most likely, they will no longer be. Therefore, the essence is simple: we spend everything, plus we will receive 2.6 trillion from the NWF next year and 1.6 trillion in 2024. That is, we lack 8 trillion, we still have accumulated funds from the NWF,” the economist said.
The last time a precedent in the economy was in 1998-1999. After the default, the Ministry of Finance and the Central Bank carried out monetary financing of the budget. “Then it was justified, because one of the causes of the 1998 crisis was the draining of the monetary system, that is, there was no money in the circulation channel at all, so there were treasury offsets. And when the burst of economic development. And this monetary financing satiated industrial enterprises, because it did not work through banks – banks relied. Now the situation is different: now the banks are standing, the money has enough liquidity, but they still add it, because there are already other reasons,” Vyugin said.
The financier believes that the ruble should be strong, despite the dissatisfaction of exporters. Reserves There are necessary, but not in such quantity. “Now we are wasting them ineptly: some of them have been frozen, some will go to the SVO, some have been put in companies that have never returned this money,” the expert said.
Europe introduced a ceiling on oil prices – how Russia will react
Moscow will be attracted to the fact that oil will not be sold, on which the price of the G7 will be calculated, even if this means a high production rate.
The G7 nations on Friday agreed to cap Russian oil at $60 a barrel, putting in place a complicated US-promoted plan to limit how much Russia, the world’s second largest oil exporter, can charge for exports. Supporters of the opinion believe that this is a very significant blow to the finances of the Kremlin, while maintaining enough Russian oil on the market to avoid an international energy crisis.