Gaidar Institute experts explain why the ruble has stopped responding to foreign trade and assess the likelihood of its weakening

In their comments for the RBC, Alexander Knobel, Alexander Firanchuk and Dmitri Kuznetsov, experts at the Gaidar Institute’s International Trade Department, explained why foreign trade has ceased to be the main factor influencing the ruble exchange rate.

Alexander Firanchuk noted that the growth of the current account (CA) early this year does not go beyond the traditional annual fluctuations. «In Q1 2025, CA was $6.25 bn higher than in Q4 2024, which corresponds to the average seasonal increase ($6.7 bn) over the past 10 years. Thus, there is no reason to believe that this growth is beyond the usual seasonal fluctuations," the expert noted.

Alexander Knobel also drew attention to the fact that compared to Q1 2024, which is a more objective assessment of the dynamics, the current account surplus fell sharply not only on the back of a $2.3 bn deterioration in the trade balance, but also due to a decrease of $1.8 bn in investment income from abroad.

According to Alexander Firanchuk, the change in the nominal ruble exchange rate in the mid-term is largely determined by current account dynamics, which, in turn, is closely related to the trade balance. «This correlation is confirmed empirically both before and after 2022. According to our estimates, a decrease in the seasonally adjusted current account by about 1% of the turnover (about $1.5 bn per quarter) has historically led to a weakening of the ruble by about 0.9%. However, this dependence is probabilistic in nature and does not always materialize in each period.

Making accurate forecasts on the ruble exchange rate is a pointless task, but the probability of further weakening of the ruble is quite high. In recent months, an important factor in the appreciation of the ruble has been market optimism about a possible resolution of geopolitical tensions, conclusion of a peace agreement and the subsequent easing of sanctions. If this factor weakens or disappears, the ruble is likely to decline," the expert said.

Dmitry Kuznetsov believes that in the current conditions the exchange rate of the national currency depends on the ratio of supply and demand of the currency within Russia, which may deviate from the ratio between exports and imports. «Due to the difficulties with funds transfers between Russia and the rest of the world, domestic companies practice transactions in which an exporter that receives foreign currency into a foreign account can provide it to an importer for the purchase of goods. At the same time, the importer transfers rubles to the exporting company within Russia. It is difficult to assess the extent of this practice, but in conditions when exporters have to sell part of the proceeds on the Russian market, this can create an oversupply of currency inside the country," the expert explained.

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