“Decode” the mystery of the Russian ruble’s price increase

Ruble Russia lost almost half of its value in March due to Western sanctions but then recovered irregularly, bouncing up to levels not seen in more than two years.

The mystery behind the ruble’s recovery has been explained to RT by Sergey Kopylov of the BSC consulting company, and a researcher at the Russian Economic University of Plekhanov.

Kopylov pointed out that the strengthening of the ruble is due to the fact that the ruble is now completely based on exports and imports, and the value of the Russian currency is determined by purchasing power parity (PPP).

The International Monetary Fund (IMF) estimates the purchasing power parity of the Russian currency at the end of 2021 at 29,127 rubles per $1. According to the Big Mac Index, the rate stands at 23.24 rubles per dollar.

The expert also noted that, before the sanctions, the weakening of the Russian currency was related to capital outflows. Thus, in 2021, net exports (exports of goods and services exceed imports) amount to $122 billion. Amount earned from Forex that is used to purchase foreign assets.

At the time of Russia sanctions, this capital flow became impossible. Thus, the $58 billion received by the Russian economy in the first quarter of 2022 put pressure on the ruble to appreciate.

“Experts’ assessment shows that, under these conditions, the ruble can strengthen at 45-50 rubles per dollar if there is no adjustment in monetary policy,” Kopylov forecast.

Rate of Russian Ruble June 6 was trading at 69 rubles per USD.