World Bank Urges Russia to End Its Ruble Policy

The World Bank called on Russia to abandon the ruble’s managed exchange-rate policy in order to moderate capital outflow, which is set to reach at least $100 billion this year, and safeguard the country’s massive monetary reserves.

The recommendation, the World Bank’s firmest on the subject yet, capped a week of economic data making it seem more likely Russia will fall from robust growth to recession.
Zeljko Bogetic, the World Bank’s lead economist for Russia, said that an average price of $30 a barrel of oil over the next two years would be ruinous for an economy that relies hugely on revenue from crude exports. Shrinking revenue, which has been falling in lockstep with the more than 70% drop in oil prices since summer, has put enormous downward pressure on the ruble, which economists consider a commodity currency. This, in turn has led Moscow to try to keep the currency from sliding and avoid widespread fears that another 1998 crash is looming.

“It’s possible even to envisage Russia’s return from a creditor to international organizations to a borrower,” Mr. Bogetic said.

Many forecasts for Russia’s economic development assume crude oil averaging $50 a barrel next year — almost 50% more than current prices. Friday, official data showed that the ripple effect from falling oil prices has been spreading to ordinary Russians.

Consumers are holding back, dragging November retail sales down 3.4% on the month, while unemployment rose 400,000 to hit 6.6%, the highest in 18 months.

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