Is The Worst Over For The Russian Economy?

Russia, the world’s largest nation, has seen its economy shift up and down and sideways, remaining staunchly viable for some time and then falling bitterly. Often the movement is in reaction to outside pressures while at other times it can be attributed to internal causes.

Only recently, analysts viewed Russia as being economically weak and some economists went so far as to suggest that Russia was struggling to repay its external debt. They predicted that the country would soon run out of foreign exchange reserves, especially following the past summer when oil prices worldwide, including Russia, reached rock bottom prices.

… THE OPTIMISTS ARE NOW CORRECT IN THEIR PREDICTIONS.

But other analysts believe that Russia will not run out of reserves anywhere in the near future and they point to several factors to prove that the country is not in financial difficulty.

No Shortage of Reserves

One of the reasons given by economists looking closely at the situation is that there is seems to be no shortage of reserves at the moment and the supply doesn’t seem to be running out, claiming that there are enough Russian reserves to cover 14 months of import.

The second reason given is the floating ruble. While oil exporters tend to have their costs in rubles, they keep their revenues in dollar and are thus protected from the lower oil prices. According to the Central Bank of Russia, Russia had an almost $50bn current account surplus in the first half of this year and the balance of payment remains robust.

As far as inflation fears, analysts believe that growth has already leveled off and that inflation will drop during the next few quarters.

But there are other fundamentals that are helping to bolster the Russian market. Corporate earnings have been generally steady and exporters, which make up the greater part of the market, have been somewhat shielded from the recession through the ruble weakening which was put into place in 2014 response to the 40 percent market correction.