Russia could face 10% drop in economy in 2015, Estonian experts say (3)
Russia may begin to limit the outflow of capital or ban the sale of rubles for other currencies, although Russian Prime Minister Dmitry Medvedev currently ruled those measures out.
Base interest rates were increased from 10.5 to 17 percent on Tuesday, which only succeeded in halting the decline of the Russian currency for a few hours, and the ruble briefly hit the 100 rubles for 1 euro-mark on Tuesday. A year ago one euro only cost 44 rubles.
Swedbank chief economist Tõnu Mertsina said high interest rates limit investments and accelerate inflation.
“The Russian Duma is already debating forcing exporting companies to convert all foreign currency income into rubles,” Endriko Võrklaev of SEB, said.
Transit expert and former minister Raivo Vare said such a move would lead to forced sales as well as bans on taking foreign currency out of the country.
The recent developments in the Russian currency situation have also begun to affect those Russians who travel little and usually have no use for currency rates. Vare said shops have begun to list prices in other currencies and the prices keep changing.
“Inflation has already increased to over 9 percent. Although the average salary is also increasing fast in Russia, at 7-8 percent annually, the summary is that people are being payed less,” Mertsina said.
Vare said Russia is preparing for a worst-case scenario of a 10-percent drop in GDP next year, although officials currently say that figure will be around 4.5 percent.
Estonia has not been left untouched by the fall of the ruble. The positive side is that Russian companies have made large investments into Estonia in recent month, opening factories, buying up companies.
The negative effect is in tourism as the high season of New Year and Orthodox Christmas are around the corner. Both periods are very lucrative for Estonian hotels and the tourism industry on the whole. Hotels have already seen many cancellations and are struggling to fill rooms, which they usually sell out for the end of December and first week of January for a premium.