Capital outflow to affect ruble's exchange rate more than oil prices - Klepach
MOSCOW. Feb 6 (Interfax) - Capital outflow will affect the ruble's exchange rate more than oil prices will, Russian Deputy Economic Development Minister Andrei Klepach said at a roundtable of the Russian Union of Industrialists and Entrepreneurs (RUIE).
Klepach said that the "traditional surge of capital outflow" is taking place in the first quarter. "This is connected with banks' increased currency assets. Added to this, as opposed to other quarters, are currency purchases by individuals and businesses, though this is actually a short-term situation," he said.
"The overall situation on the currency market and in the economy is fundamentally changing, which is also important. This process began earlier and will not end with this year alone. It is connected with the fact that we are going from a large and robust current account balance that was at one point up to 10% of GDP into a situation when the current account balance is near zero or even becoming negative. In December, it appears, it was already negative, but increased in January and the first quarter as import fell and export was high. For that reason, the first quarter is not looking too bad. But in any case, if capital outflow remains significantly high, it will cover the balance, particularly when it reaches zero, and this creates a situation of uncertainty and risks," Klepach said.
"The options here are clear - perhaps this is a factor that will lower the ruble's exchange rate; but the forecast for the exchange rate is as thankless a thing as the forecast for oil prices, and the two are connected. I'll remind you that our base forecast is set with the exchange rate for the ruble falling as a long-term trend. It's another matter that that the scale of this [a weakening forecast] is not large, and January has covered the yearly forecast that exists [for weakening], but we agree that there will be a certain adjustment [towards strengthening]. The fundamental factors exist for this, and the Central Bank's actions are leading to this. But really, our economy and our currency are ending up in an essentially different situation it seems, already in the second half of this year and next year when the fate of the ruble's exchange rate will largely be determined not in its relation to export and import or oil prices, but by the situation with capital outflow. For that reason the fundamental question is what to do and in what conditions can we still, firstly, overcome and lower gray or shadow capital outflow that is not falling, but rising; and secondly, to what extent can we turn the tide as a whole in the investment climate in order for capital to flow into Russia and not out of it," Klepach said.
He described his personal opinion regarding possible measures for solving this problem, specifically that it is necessary to "increase trust towards banks. In connection with this, it is probably necessary, firstly, to return to the question of changing the size of the people's deposits that are guaranteed by the government, raising the bar above 700,000 rubles; and secondly, consider the measures and possibilities for guaranteeing deposits from entrepreneurs or several corporate deposits as well, though it is clear that it is impossible to protect them completely," Klepach said.
He said that the current behavior "of enterprises transferring accounts to large state banks is connected precisely with the attempt to get insured."
Another measure, according to Klepach, could be raising state investment, which would be issued, among other things, as private capital guarantees. "There are tools for this - a fund for direct investment and state guarantees, though state guarantees practically do not work. It is necessary to unblock this situation here. There are questions about what type of project the government itself is realistically beginning and, above all, can guarantee will not be reviewed after a year or in the same year [as the project]," Klepach said.