Putin’s rouble: too good to be true?

PutinLONDON | Russian presidential election on Monday arose more questions than certainties, from politics to the country’s economy. As international observers cast a long shadow over the fairness and transparency of the process, thousands of Russians demonstrated to challenge Vladimir Putin’s victory, crowding into a central Moscow square to chant slogans against the former Federal Security Services director.

Despite democratic concerns, Putin has once again grabbed the power in Russia. Yet, some voices in the City expect him to gain a less easy ride over the economy: currency specialist HiFX said that, although so far this year the Russian rouble has had a good run, strengthening from levels above 50 rouble to £1 to briefly test below £46 last week, it has been the global economy rather than politics that have been driving the Russian currency.

“Its strength is down to the stabilisation that we have seen in the European sovereign debt crisis. On top of this it is the high yielding commodity currencies which are sought by investors in times of risk aggression and the rouble is one of these with its current 8pc yield.”

Inflation, although remarkably high, is expected to remain below 10% in 2012 and high oil prices help improve the prospects for the Russian economy and indeed the government’s revenues.

Chris Towner of HiFX said that

“After the euphoric start to 2012, Putin’s re-election comes at a point when financial markets are questioning the longevity of the current good feel,” and emerging markets like Russia’s could be affected.

Russia’s GDP is expected to grow by 3.7pc in 2012, 0.5pc down from 2011’s figures, according to the deputy minister of Economy Andrei Klepach.

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

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