icon bookmark-bicon bookmarkicon cameraicon checkicon chevron downicon chevron lefticon chevron righticon chevron upicon closeicon v-compressicon downloadicon editicon v-expandicon fbicon fileicon filtericon flag ruicon full chevron downicon full chevron lefticon full chevron righticon full chevron upicon gpicon insicon mailicon moveicon-musicicon mutedicon nomutedicon okicon v-pauseicon v-playicon searchicon shareicon sign inicon sign upicon stepbackicon stepforicon swipe downicon tagicon tagsicon tgicon trashicon twicon vkicon yticon wticon fm
18 Mar, 2008 04:23

Pros and cons of falling dollar for Russia

The weakening dollar, together with skyrocketing oil prices, is inevitably having an impact on the Russian economy. According to experts, in the short-term, it's likely to be positive for Russia, but the downside could be felt later.

Analysing the risk profile for Russia against a background of global uncertainty in the financial markets, one of the world's leading advisory companies, Merrill Lynch, remains bullish on Russia's outlook, saying Russia is still much safer than other markets.

“We’re supporters of the idea that Russia is a safe haven, taking into account strong macro-economic fundamentals and oil prices, which are very favourable for Russia at the moment,” said Yulia Tseplyaeva, Chief Economist of the company.

In the long-term, however, high commodity prices could cause structural problems for the Russian economy.

“Easy money sends distorted signals and the government starts to spend too much. We've seen some minor acceleration of economic growth but the side effect was high inflation,” Evgeny Gavrilenkov, Chief Economist at Troika Dialog explained.

A possible fall in commodity prices, which so many experts are concerned about, could be both a blessing and a curse for Russia as Aleksey Mamontov, head of the Moscow International Currency Association, affirms.

“Falling oil prices can pretty much help the Russian economy, driving its diversification away from raw materials and energy resources,” he said.

Handling Russia's commodity wealth and appreciating currency is especially important in the light of the government's ambitious goal to drive the Russian economy into the world's top five by 2020.