“They enervate rather psychologically”: how change of currency and oil rates influences our life

What is worse — inflation or deflation?

The talk began with a discussion of inflation. Natalia Milchakova said that a short-term surge of inflation caused by a hike in VAT earlier this year and growth of tariffs on electrical energy affected the companies working for the domestic market.

But now the situation has stabilised, official inflation has reduced to 4,3%. The inflation rate (the one the population feels) is about 10%. In August, even deflation was detected in one of the sectors of the Russian economy: it is fruits and vegetables, of course. It is a seasonal factor, which happens every year.

Deflation, in itself, even though sectoral, isn’t the worst factor for us. But for Europe, according to Milchakova, it is always a problem: it is linked with a crisis of overproduction because of which prices fall so that people will buy at least something. In this case, stagnation in the economy begins.

Generally speaking, the expert says that consumer inflation is a subjective matter. Despite the existence of an average rate, in every specific case, it is linked with a certain person’s consumer demand. And it is always different in regions and cities.

In my opinion, all the latest events are big mystification. Trump should have shown he is a strict president and scare Iran. But there wasn’t any real military conflict in the end, and this is why the “military award” of dollar quickly disappeared

Euro, dollar, ruble: which one is stronger?

As for the latest events in Saudi Arabia that affected oil rates and the rates of the key currencies afterwards, Milchakova is confused.

“In my opinion, all the latest events are big mystification. Trump should have shown he is a hard-line president and he should have scared Iran. But there wasn’t any real military conflict in the end, and this is why the “military award” of dollar quickly disappeared,” she stated. “But the story of Brexit in Europe isn’t clear. This is why the euro isn’t very stable, and we already see its 2015-early 2016 levels. But it isn’t the limit: in 2014, the euro went down and was in line with the dollar, so it can keep falling.”

From the expert’s point of view, the dollar still remains the most stable currency while the American economy is in growth, and even sceptics from the FRS admit it. We will wait and see if the forecast that the situation of the inversion curve of American bond yield will get worse.

Damir Gabdulkhakov added to this that the correlation of oil prices and the ruble rate isn’t that strong any more. This correlation has now significantly reduced in comparison with the same 2014, the ruble isn’t so sensitive to fluctuations of oil rates as it was several years ago, and we see just slight fluctuations.

“They enervate psychologically rather than influence deposit yield,” the manager of Oktritie bank in Tatarstan explained. “Of course, when there is alarming news, we see a short-term surge in currency purchases in our offices. But in general dollar deposits have been falling for years already because the fluctuations are so slight that people lose more money on currency exchange.”

The banker also noted that nowadays the dollar rate hadn't reached even the average annual forecast for 2019: analysts promised a rate of 67 rubles per dollar, now we see the average annual rate of 65-66 rubles, or more precisely 64,6 rubles today.

We see a kind of change of consumer behavioural model for saving. Consumer lending is slower because indeed, there is inflation, while the population’s real income, unfortunately, hasn’t grown in the last five years

People began to take out fewer loans and save more

Gabdulkhakov said that people had been more careful — they take out fewer loans and keep more money on saving accounts.

“Of course, consumer lending volumes are slowing down. Nevertheless, this growth goes on,” he noted. “At the same time, the share of people’s income, which is saved, is increasing. We see a kind of change of consumer behavioural model for saving. Consumer lending is slower because indeed, there is inflation, while the population’s real income, unfortunately, hasn’t grown in the last five years. People tried to keep the habitual quality of life by means of consumer lending for some time, but these opportunities disappear as time goes by. And probably the tendency for slower lending and growth of savings will continue.”

The banker noted a significant reduction in the share of currency deposits, especially in euro whose yield is approaching zero. According to him, in general the ruble is looking more interesting nowadays. But their rate is also reducing after the key rate of the Russian Central Bank, which is back to the pre-crisis level.

Damir Gabdulkhakov doesn’t see any problem of the population’s debt load, which the Russian Ministry of Economic Development has been scaring everyone with since the summer: the delayed loan payment rate has been steadily reducing since 2014, while banks are creating new effective methods to evaluate a borrower’s creditworthiness.

Why crisis is good

As it usually happens in such talks, the experts remembered that crisis provides new opportunities. But not for everyone. For instance, the hike in VAT caused real problems for small businesses, and many aren’t handling them. But Milchakova hopes that the current economic problems can motivate the state to stimulate businesses.

“For instance, in 2015, when the economy was in a big crisis, the state liberalised the liquefied gas market. Independent producers entered it, first of all, I am speaking about Novatek and its project Yamal LNG. They built LNG carrying icebreakers that don’t have analogues around the world,” she reminded. “In other words, the crisis motivated the state to start creating more favourable conditions for private investments, and it began to invest money in the businesses that are strategically important for the country’s development. For instance, the same Yamal LNG was financed from the Reserve Fund.”

After the end of the structural crisis in the early 2000s, Russia’s economy adopted a very unfavourable feedstock-based development vector. Everything that has happened in the last years breaks this tendency and makes reinforce processing sectors

Of course, the expert couldn’t help but put an example of anti-Russian sanctions: the Bologna School of Economics calculated that sanctions decrease the growth pace of Russia’s GDP by 0,1% a year. But if not the sanctions, the events in the food market could have developed in an unfavourable direction for agriculture.

“We could have lost some market segments. And thanks to the sanctions, on the contrary, we had to develop them. Agrarian holdings have really benefited from sanctions. Others, especially small businesses, had troubles,” Milchakova notes. “After the end of the structural crisis in the early 2000s, Russia’s economy adopted a very unfavourable commodity-based development vector. Everything that has happened in the last years breaks this tendency and makes reinforce processing sectors.”

“We will soon see a series of merges of big chain stores”

In answer to Realnoe Vremya’s question about which sectors had been affected the most in the last months, the experts replied that the food consumer suffers from the rise in VAT the most.

Prices for food have gone up the most in the last year. Moreover, there are internal factors in every segment of the food market: for instance, bread has become expensive because of growth of electrical energy tariffs, chicken meat — because of a higher price for forage. Alpari’s expert thinks that due to the rise in VAT we will soon see a series of merges of big chain stores (for instance, Dixie, Red and White and Bristol have already merged).

Some non-food items have also become expensive. While, for example, TVs have gone down in price. The oil business is also feeling good if we don’t consider that Tatneft’s shares fall a bit when oil prices decrease.

If we deal with securities, we should do it in the long term: some cooling in the global stock market is expected in a year or year and a half, through a small crisis. This is why it is better to purchase shares for four years

Where to keep money — in stockings, bank or buy Tatneft shares?

During any crisis, experts are asked how to save money, not to allow inflation to absorb it and probably make a beneficial investment.

Natalia Milchakova advises to, first of all, precisely understand if you want to save money or make a profit exceeding inflation.

“If we need to earn, I would advise dividends of blue-chip companies: Nornickel, Rosneft, Gazprom, Tatneft or Surgutneftegaz’s preferred shares. You can hold them for years and receive dividends, you can also resell them. And your goal is to not just save money, keep money in a highly reliable bank in rubles and dollars (approximately by half) to save a dollar backstop if the ruble falls,” the expert recommended.

Damir Gabdulkhakov noted that one should carefully diversify the portfolio and be responsible for decisions.

“If we deal with securities, we should do it in the long term: some cooling in the global stock market is expected in a year or year and a half, through a small crisis. This is why it is better to purchase shares for some four years. You shouldn’t place money that you might need instantaneously,” the banker warned.

As for the recent news that the Russian regulator is trying to limit the access of Russian private investors to foreign stock markets, Milchakova hopes that these amendments to the law will be improved. She thinks that such a decision isn’t far-sighted: an investor is divested of choice and possibility to purchase reliable assets.

As for forecasts for Russia, both experts unanimously talk about stability: this year the dollar is unlikely to go above 67, the euro won’t exceed 73 rubles

Forecasts: patient is alive, everything is stable

Everyone in the international market has been terrified of a new upcoming crisis: the case is that US state bonds are demonstrating inversion. It is a situation when the yield of short-term bonds exceeds the yield of short-term ones. This is why many big economists are predicting the beginning of a new recession and world crisis. But this has been happening for long, and nothing similar is taking place yet.

As for forecasts for Russia, both experts unanimously talk about stability: this year the dollar is unlikely to go above 67, the euro won’t exceed 73 rubles. There is no objective condition pushing the ruble down: oil price has stabilised, Russia has a positive trade balance, budget surplus, growing economy.

There is no turbulence looming on the international arena: the presidential election in America is close, and, in Damir Gabdulkhakov’s opinion, nobody will rock the boat there, the Communist Party’s session in China is next year, they will do their best to keep the balance. We are gradually moving in key rate inflation corridor.

And if everything is stable here, it means we can make new plans. Till the next crisis.