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22 Jan, 2009 07:54

Rouble has further downside despite steadying over last week

The Russian Rouble has strengthened over the past two days. The government expects greater stability for the local currency over coming months, but experts doubt the controlled devaluation is over.

Russia’s Rouble lost around 40 % of its value in just over half a year reflecting the collapse in oil prices and the worst global economic outlook in a decade. Last week, the Central Bank allowed the Rouble to fall more sharply, but then, this week, it steadied.

However, Sergey Guriev, Head of the New Economic School, attributes the gains to demand for Roubles as companies prepare to make tax payments.

“The central bank used these couple of days to revaluate the Rouble a little bit. But eventually Rouble will have to come down, and the market is now thinking of the Rouble reaching 35 Roubles per dollar in March, and something like 40 in the fall or 42 in December. I think, if oil prices don’t go back up to the levels they used to be last year, that’s where the Rouble should be.”

This rate, experts believe, will boost Russia’s industry in the longer term and help exporters. Shorter term, however, experts are becoming more gloomy on the outlook for the economy. The Head of MDM Bank, Oleg Vyugin, says the growth numbers will be disappointing.

“Reduction of demand, reduction of incomes, of populations and households, and, as a result, some reduction of GDP growth. Let's say up to minus 2% or minus 3%.”

This week officials tore up the most recent forecasts. The 2009 budget will be revised based on an average oil price of $41 dollars per barrel. Russia’s 2009 budget will be revised based on the average oil price of $41 a barrel and a dismal global economic outlook.