Financial maneuvers may lead to social turbulence
The official exchange rate of the euro to the ruble of the Central Bank of the Russian Federation decreased by 1 ruble on Wednesday to 73.8 rubles; the exchange rate of the dollar to the ruble decreased by 1.37 rubles to 65.3 rubles. In late August Russian Prime Minister Dmitry Medvedev stated that the ruble exchange rate could be supported by selling foreign currency to exporters.
Georgy Ostapkovich, market research director of the HSE Center, is always wary when someone is starting to offer these regulatory activities of manual control: “I am afraid that if we open this Pandora's box it will start a domino effect. If they adopt regulation of foreign currency selling, then they will adopt regulation of food prices, at first there will be 16 items, then 30, then 70, and so on. Then there will be a failure on a regional scale, products begin to disappear, pharmaceuticals will fade away then. Then companies will begin to go bankrupt, because the stuffing of money will lead to an inevitable acceleration of inflation. Naturally, investment programs with long cycles cannot be completed, companies will go bankrupt and so on.”
Ostapkovich predicts that, as a result, a year later all these measures will be phased out as ineffective, but the situation will be much worse than at the start.
Speaking about the introduction of foreign exchange earnings, the expert notes: “This position is not new. Of the more than 180 member states of the IMF, half are engaged in currency regulation. But it's basically the direction of Africa, weak export-oriented countries. From continental Europe, there is Slovakia, Bosnia and Herzegovina, and Macedonia. Of the major countries, the BRICS countries are the most interesting – China, Brazil and India. If we take the BRICS as developing countries, none of the countries with developed economies are engaged in monetary control.”
Ostapkovich says that Russia has a difficult economic situation, but the labor market, the market for goods, and the financial system are controlled. “Therefore, these mobilization exercises should be done very carefully. Because we can go to this side, and there could be quite an unpredictable situation, up to social turbulence,” the expert thinks.