7 Dec 2017 11:14

Minister sees ruble as close to fundamental value, no problem of overvaluation or risk of steep drop

MOSCOW. Dec 7 (Interfax) - The ruble's exchange rate is currently close to its fundamental value, and the problem of excessive strengthening that was seen in the spring of 2017 has faded, Economic Development Minister Maxim Oreshkin said.

"I remember the forecast that we gave in April. At the time I made public statements that the ruble is overvalued. If we compare the current point with the April point, we see that the ruble has depreciated by 15% against the euro, and the real effective exchange rate has dropped by about 7%. The ruble [has fallen] against the yuan by about 10%. Against the dollar, yes, it hasn't fallen as much as we expected. But this was in large part due to our underestimation of the dollar's weakness on the world market," Oreshkin said in an online interview with Gazeta.ru.

"What's important to understand is that the overvaluation of the ruble that there was in April, has now been negated by this 7% weakening of the ruble's real effective exchange rate, and the ruble is trading about where it should be trading based on all of our model estimates and the level that is needed to balance the balance of payments," Oreshkin said.

The mechanism of purchasing forex that the Finance Ministry launched this year is reducing the dependence of fluctuations in domestic indicators, such as the exchange rate, inflation and GDP growth, on fluctuations in oil prices, the minister said.

The ruble "will not crash" in December or next year, Oreshkin said.