By Evgeny Ogorodnikov
“The ruble weakened because it was too strong” - this unexpected phrase, seen in a random blog, made me wonder: what method can be used to assess with at least some objectivity the level of fortress or weakness of the ruble?
We took two periods, from 2000 to 2007 and from 2010 to 2022, and determined the "normal" dynamics of the ruble exchange rate in terms of inflation ratio - in the US and in Russia. In 2000, the exchange rate was about 25 rubles to the dollar. In 2007, about the same. By the way, at that time, not only Russians, but also Western economists, in particular Mark Mobius, believed that the ruble was too strong and this hindered the development of the Russian economy (as well as in 1997, the Expert magazine wrote: a strong ruble threatens the economy).
So, if the ruble were depreciating on a par with relative to US inflation, then in 2007 it should have cost not 25 rubles, but about 55 rubles per dollar. But in fact, it reached this level only after the first powerful package of sanctions - in 2014. And not by accident. The impetus given by the sanctions fundamentally changed the structure of the balance of payments (significantly reduced the ability to attract foreign investment) and, more importantly, changed the demand for money within the country, increased the need for domestic investment and the accumulation of import-substituting capital.
If we consider the period of 2010–2022 and evaluate the potential dynamics of the ruble against the dollar in terms of relative inflation, based on the fact that the “normal” start would be the level of 55 rubles per dollar, then the current “normal” level will be in the range of 100–110 rubles per dollar. And this is a consequence of the same factors - the need to increase the money supply within the country in order to create a large national economy and reduce the potential for attracting foreign investment. This is yet another, apparently the last, point of "decoupling" from the policy of the "Washington Consensus", when the country's monetary and foreign exchange policy is oriented towards the main task - attracting foreign investment and the ability to serve them. Now we are faced with a completely different task - to create the prerequisites for growth,
Of course, local fluctuations in the ruble exchange rate are very unpleasant - inflation, nervousness of financial markets. Of course, a weak ruble in the medium term means additional costs for imported components, equipment and everything that we still have to buy abroad.
But given the long-term dynamics of the “normal” ruble exchange rate and completely new tasks for our economy, the exchange rate of 100 compared to the key rate of 12% loses a lot in terms of the negative impact on economic dynamics. Incidentally, this is confirmed by the fact that the increase in the key rate had no effect on the exchange rate.
However, are there tools for the trend strengthening of the ruble that do not hinder, but, on the contrary, promote economic growth and import substitution? Such instruments that will make it possible to offset, in relation to the ruble, the rapid growth of the money supply in circulation necessary for economic development?
We would now turn our attention to the possibilities of protectionist policies in relation to goods and markets that are not strategic for our technological gaps. There are hundreds of such markets. And protectionism on them can seriously reduce the demand for foreign currency and imports.
Until 2022, our economy had an intolerably large share of imports in GDP, at the level of 21–22%. Now the rate is decreasing, but slowly. At the same time, if we analyze the periods when countries, including developed ones, relied on the development of the domestic market, then the share of imports in GDP without loss for growth can be reduced to 10‒12%. In the current situation, this is about $170 billion in demand for foreign currency and at least a similar increase in domestic demand and consumption. The first increases the rate, the second accelerates growth.
Once again, we are not talking about complex and rare components and equipment. We are talking about hardware, food for fish and animals, modern plastic toys, sporting goods, clothing, furniture. These markets, according to old habit, remain unprotected from imports, and if they were protected at least symmetrically to the way exporters protect their markets from us, the Russian economy would greatly benefit. We would become richer as producers, our markets would be saturated with domestic goods, and we would stop worrying so much about fluctuations in the ruble exchange rate, and in response to this, it would become calmer and stronger.