The TV program Week talked to the senior analyst of the company Alpari Vadim Iosub on the deeper causes of the fall of the Belarusian ruble.
Vadim Iosub, senior analyst of the company "Alpari":
A lot of interesting things happened in the world in the last month. In particular, we have seen from the beginning of August until the "Black Monday" the dollar's decline against all major currencies. Simultaneously, the Russian ruble was falling. We remember that at that time there was devaluation and the transition of tenge to a floating rate. We witnessed the collapse of China's stock exchanges. On Black Monday, American stock exchanges showed the maximum daily decline. In general, there's clearly unrest in the world.
What's behind all this collapse?
In fact, the fall of oil has its reasons. This is slowdown in the world economy, especially China's slowdown. China is the largest consumer of raw materials in the world. China alone consumes about 10% of world oil products, about 30% of world's ferrous and nonferrous metals so even a slowdown in China's growth, let alone Chinese economy's fall, leads to such volatility in commodity markets, currency markets, and stock markets.
Accordingly, if Belarus's main trading partners are tied to the sale of hydrocarbons and if it sags, it automatically affects Belarus?
Foreign trade has a very significant share in our country's GDP, so we do depend on the processes taking place in the world.
So, the main benchmark in this case is the price of Brent?
Yes, that's right. Here is a graph. In fact, we can see how the price of Brent crude oil declined and reached the 6-year low at the beginning of this week (about $42). From this Monday oil has been growing and the cost of a barrel rose by about $5, and in response, the Russian ruble has become stronger in the last days. In response to this, we see that the Belarusian currency's fall has stopped.
On Monday, the Belarusian ruble weakened against the dollar and the euro; on Tuesday this fall slightly continued, but no longer to the same extent. But in Russia, this fall has been going on for the last five days.
Indeed, the Russian ruble was falling heavily, and the bottom of the drop fell on that Black Monday, because oil prices continued to fall. Monday the drop of oil price has stopped and, respectively, the fall of the Russian ruble immediately stopped and it began to strengthen. Following this, the growth of the dollar and the euro against the Belarusian ruble slowed down and then the trend was slightly reversed.
What factors played a positive role in the fact that there was no panic among currency exchangers?
We can say that the growth of foreign exchange rates was fairly painless: there was no shock, no panic. This is due primarily to the fact that we have been using a new exchange rate regime since the middle of January. In fact, a floating exchange rate. In previous years, the exchange rate was artificially held back and there could be often a situation when there was a deficit of currency. The fluctuating exchange rate aims primarily to constantly adjust to the changing supply and demand. If demand for the currency is growing, it automatically leads to the increase rate of foreign currency, but the currency will always be on the stock exchange and exchange points will always have it. So while we will continue this policy here in the currency market, the policy of floating exchange rate, we will never encounter the shortage of currency in exchange points.
There is even the so-called Big Mac Index, which helps calculate the value of the national currency. Judging by it, last year the Belarusian ruble was undervalued by 42%. How do you feel about that?
This is a little bit funny way to calculate a fair rate of a national currency. This method arose because Big Macs in many countries are made according to the same formula. You can take a Big Mac in each of these countries in the national currency, compare its value and compare the exchange rate. But, of course, you shouldn't treat this way of comparing exchange rates too seriously.
Prices. Typically, when the exchange rate increases, prices usually rise too. These processes somehow slowed down in Belarus. In this case, can it somehow play a positive role?
Prices or inflation should not grow exactly as much as the foreign currency. In the end, imported goods could grow in proportion to the exchange rate, while goods that include some imported elements can grow only slightly. If products are made without using foreign components, they should not become more expensive despite changes in foreign exchange rates. In practice, we see that following the growth of foreign exchange rate prices also rise, but not to the same extent.