In February 2001, the situation on the Russian foreign exchange market was quite interesting for investors. The factors related to the speculative pressure on the ruble exchange rate were as follows: firstly, Russia has finally decided to carry out all the debt payments due to the Paris Club. The respective amendments for the 2001 Federal Budget Law were passed throough the State Duma (see above). Secondly, during the first three weeks of February the foreign reserves of the Russian Central Bank dropped from $29.5 bln. to $28.7 bln. This drop was most likely resulted from both the necessity for the Ministry of Finance to buy dollars for the external debt repayments and the RCB’s policy towards stabilization of fluctuations on the foreign exchange market. Thirdly, the inflation rate in Russia is growing. Fourthly, one shall take into account a possible decrease in the rate of compulsory sales of the exporters’ revenues denominated in hard currency on the foreign exchange market to 50%. And, finally, there is an ongoing drop in international oil prices that the Russian commercial banks traditionally consider a speculative factor for the ruble exchange rate.
In January 2001, the official dollar exchange rate grew from 28.16 rubles/$ to 28.37 rubles/$, i. e. by 0.75% (9.33% annualized). The ‘today’ dollar exchange rate in the SELT dropped from 28.5856 rubles/$ to 28.4453 rubles/$, i. e. by 0.49%. The ‘tomorrow’ dollar exchange rate dropped from 28.5678 rubles/$ to 28.4665 rubles/$, i. e. by 0.35% (see Fig.7).
In February 2001, the dollar exchange rate grew from 28.37 rubles/$ to 28.72 rubles/$, i. e. by 1.23% (15.85% annualized). The ‘today’ dollar exchange rate in the SELT grew from 28.4453 rubles/$ to 28.6432 rubles/$, i. e. by 0.70% (8.68% annualized). The ‘tomorrow’ dollar exchange rate grew from 28.4665 rubles/$ to 28.6598 rubles/$, i. e. by 0.68% (8.46% annualized).
In February, despite the growth in the volatility level of the ‘Dollar/Ruble’ exchange rate, the trading volumes by dollar in the SELT dropped. According to the preliminary estimations, during last month the overall trading volume by the most liquid ‘today’ and ‘tomorrow’ contracts made up 75.5 bln. rubles and 62.8 bln. rubles, respectively. If so, the total volume of turnover by these contracts in February should be at about 12.8% inferior to the respective index registered in January.
Figure 7
In February 2001, the Euro/Dollar exchange rate continued to drop on the world financial markets Euro (see Fig.8). Between January 31 to February 28, 2001 the Euro dropped from 0.9416 $/Euro to 0.9209 $/Euro, i. e. by 2.2%. The further dynamics of the Euro exchange rate vs. other hard currencies to a great extent will be related to the envisaged measures by the US Federal Reserve and the European Central Bank with respect to the level of their interest rates.
Figure 8
In January 2001, the official Euro exchange rate dropped from 26.14 rubles/Euro to 26.0 rubles/Euro, i. e. by 0.54% (see Fig.9). The ‘today’ Euro exchange rate in the SELT dropped from 26.6858 rubles/Euro to 26.4528 rubles/Euro, i. e. by 0.87%. The ‘tomorrow’ Euro exchange rate in the SELT dropped from 26.77 rubles/Euro to 26.4667 rubles/Euro, i. e. by 1.13%.
In February 2001, the official Euro exchange rate grew from 26.0 rubles/Euro to 26.22 rubles/Euro, i. e. by 0.85% (10.64% annualized). The ‘today’ Euro exchange rate in the SELT dropped from 26.4528 rubles/Euro to 26.3078 rubles/Euro, i. e. by 0.55%. The ‘tomorrow’ Euro exchange rate dropped from 26.4667 rubles/Euro to 26.31 rubles/Euro, i. e. by 0.59%. According to the preliminary estimations, in February the total trading volume by ‘today’ and ‘tomorrow’ contracts on Euro in the SELT made up 2.451 bln. rubles. That represents a 28.7% decrease of against the respective index registered in January.
Figure 9
Table 2.
Indicators of Financial Markets
month
October
November
December
January
February*
inflation rate (monthly)
2.1%
1.5%
1.6%
2.8%
2.8%
annualised inflation rate by the month’s tendency
28.32%
19.56%
20.98%
39.29%
39.29%
the RCB refinancing rate
28%
25%
25%
25%
25%
annualized yield to maturity on OFZ issues
18.76%
20.85%
20.94%
20.12%
19.5%
volume of trading in the secondary GKO-OFZ market a month (billion rubles)
16.97
13.00
10.77
11.82
11.0
yield to maturity on Minfin bonds by the end of the month (% a year):
4th tranche
28.55%
31.06%
30.16%
26.55%
27%
5th tranche
20.87%
21.17%
21.99%
19.17%
20%
6th tranche
19.64%
19.69%
20.17%
18.62%
18%
7th tranche
16.86%
16.73%
16.67%
15.04%
15.5%
8th tranche
19.15%
20.42%
20.86%
18.72%
19%
INSTAR – MIACR rate (annual %) on interbank loans by the end of the month:
overnight
11.17%
6.69%
21.70%
14.12%
12%
1 week
13.18%
10.26%
15.17%
13.84%
13%
official exchange rate of ruble per US dollar by the end of the month
27.83
27.85
28.16
28.37
28.72
official exchange rate of ruble per Euro by the end of the month
23.42
23.88
26.14
26.00
26.22
average annualized exchange rate of ruble per US dollar growth
0.29%
0.07%
1.11%
0.75%
1.23%
average annualized exchange rate of ruble per euro growth
-4.29%
1.96%
9.46%
-0.54%
0.85%
volume of trading at the stock market in the RTS for the month (millions of USD)
414.1
353.9
247.2
339.5
420.5
the value of the RTS Index by the end of the month
189.00
143.42
143.29
173.53
164.76
growth in the RTS Index (% a month)
-5.06%
-24.12%
-0.09%
21.10%
-5.05%
* Estimates
S. Arkhipov, S. Drobyshevsky.
Investment in the real sector
In 2000, the investment sphere experienced substantial changes. It was te advanced growth rate in investment vs. dynamics of GDP that became a distinguishing feature of the year. The growth in investment in 2000 is mostly attributed to the impact of very favorable external condtions particularly to the Russian exporters. Hence, the proportion of the fuel and energy and transport complexes in the structure of investment resources grew by almost 8 per cent points compared with 1999. With the growth in investment demand on the part of export-oriented sectors, one can note an increase in the output of machinery and equipment that became possible at the expense of introducing into prouction of previeously idle capacities. Considering results of the year, one can state that the magnitude and directions of investment activity did not meet actual needs in the economy modernization and in renewal of capital assets. The problem of the investment manoever in favor of the sectors that produce goods and services with a high level of value added and are capable to ensure the national economy’s copetitiveness has remained unresolved.
The nature of the investment activity became one of the most visible proofs of the ontradictoriness of the results of 2000.
With the growth in investment demand, the domestic machine engineering demonstrated its inability to saturate the market with qualitative material and technical resources. The growth in the demand for import equipment and machinery with a focus on second-hand ones becane characteristic of 2000.
The increase in the scale of saving in the economy has intensified the problem of transformation of the savings. With the pace of the financial setor reform eing very slow, the contribution of the banking sector to crediting the rela sector continue to fall, and it is enterprises’ own capital tt remain a main sources of investment for them, because the mechanism of inter-branch capital flow and accumulation of gross aving to develop competitive sectors is out of order.
The dynamics of investment also found itself under the impact of the remaining low income level. The current level of the domestic effective demand in the consumer market and the market for material and technical resources constrained opportunities for the growth in profitability of the output of goods and services and, accordingly, of a formation of investment resources at the expense of enterprises’ own capital. In addition, by May 2000 the dynamics of investment activity was also affected by the deteriorating financial position of enterprises, renewal of inflationary processes and a sisgnificant tariff and price rise for produce and services of natural monopolies.
