RUB depreciation to lead to loss of competitiveness of Armenian  products in Russian market- Suren Parsyan

ArmInfo.Further depreciation of the ruble will lead to the loss of competitiveness of goods of Armenian origin in the Russian market and a decrease in the pace of economic  activity in Armenia. Economist Suren Parsyan expressed this opinion  in an interview with ArmInfo.

The expert noted that the developments around Ukraine were a shock to  the world economy. Foreign banks and financial institutions severely  limited funding programs, which reduced economic activity. This, in  turn, led to a reduction in energy demand and a sharp decline in oil  and gas prices.  Thus, if last year 1 thousand cubic meters of gas  cost EUR 2,500-3,000 on the European market, today it is EUR500-600.   There is a similar situation in the oil market as well.

Pricing in the energy market was influenced both by the establishment  of a price ceiling for oil products of Russian origin, and by  Russia's desire not to lose the Asian market, which is why Russian  oil is sold there cheaper than its exchange value. The decline in  prices continues.

And, since Western sanctions, as well as a sharp reduction in oil and  gas revenues (or 20-25% of exports), which provide more than 40% of  Russian budget revenues, led to a decrease in dollar flows to the  Russian Federation, the Russian ruble began to depreciate against the  US dollar.

<This will have its natural negative impact on the economy of  Armenia, since Russia is Armenia's number one trading partner. In  2022, Armenian exports to the Russian Federation tripled - up to $2.4  billion (Russia's share in exports between the Republic of Armenia  and the Russian Federation in 2022 increased from 28% to 45%, ed.  note). And as a result of the devaluation of the Russian ruble,  Armenian products in the Russian market become more expensive, and  therefore lose their competitiveness, while Russian products in the  Armenian market, on the contrary, become cheaper. If this situation  with the ruble persists, the export of goods of Armenian origin to  the Russian Federation will decrease>, the expert believes.

In addition, as Parsyan notes, the "weak ruble" reduces the  consumption of about 80,000 Russians who temporarily moved to  Armenia, because they can buy less goods and pay for less services by  the devalued ruble they brought with them. <Last year's GDP growth in  Armenia by 12.6% was mainly provided by immigrants. And now the  reduction of the financial potential of this factor, the increase in  the competitiveness of goods of Russian origin in the Republic of  Armenia, as well as the decline in consumption in Russia itself, will  naturally affect the indicators of economic growth in Armenia>, the  expert forecasts.

As for the risks for Armenia to fall under secondary sanctions if its  actions are found to be in violation of requirements from the United  States or Europe, which the United States government warned about a  month earlier, also pointing to Armenia as a country <was used as a  <transshipment point>  for the illegal redirection of prohibited  goods to Russia or Belarus>, then Parsyan admits that the export of  equipment from the Republic of Armenia to the Russian Federation in  2022 increased dramatically.

"The export of goods of Armenian origin could not have grown so much,  considering that the Upper Lars checkpoint was closed for several  months," he says. "Today, Russia needs various equipment and  technologies that are purchased through third countries," the  economist adds.

According to him, in 2022, Armenia exported goods worth 61 million  dollars to Turkey, 98% or about $60 million of which is gold  (according to the Customs Service, in the first half of the year, the  volume of exports from Armenia to Turkey amounted to $20.3 million,  of which $20.1 million is gold, ed. note). <We don't have that much  gold. This is sanctioned Russian gold, which, through various  manipulations in Armenia, was further exported to Turkey>, the expert  believes, recalling that in August 2022 the State Revenue Committee  of the Republic of Armenia stopped an attempt at large-scale gold  smuggling from the Russian Federation to the Republic of Armenia. It  was from this month, according to the economist, that this channel  for the export of Russian gold to Turkey was closed.

At the same time, Suren Parsyan emphasizes, the Armenian government,  the Central Bank and the Union of Banks of Armenia are extremely  attentive to such risks. For example, the UBA regularly publishes  reminders on how to work in order not to fall under sanctions, and  the banks themselves "watch" for the accounts and money transfers of  citizens of the Russian Federation.

The Russian currency has been gradually losing its positions since  the beginning of 2023. Experts now consider the dynamics of oil  prices to be one of the main factors affecting the ruble exchange  rate.  According to the Central Bank of the Russian Federation, the  US dollar exchange rate today is RUB77.95/$1. At the same time, the  average nominal exchange rate of the dollar against the ruble in 2022  amounted to RUB67.46/$1 against RUB73.65 /$1 in 2021. Russian experts  forecast that the devaluation of the ruble will continue in the  future, and the rate in the next two months will reach the level of  80-85 rubles, and note that this is not the limit.

It also became known earlier that the number of Russian families with  savings has decreased since the beginning of this year - now they are  less than half. According to a survey conducted by the Romir research  holding, if in January 2023 51% of the families surveyed reported  having savings, by the end of March their number had dropped to 49%.  According to experts, the population of Russia will gradually become  poorer, as goods will become more expensive, but incomes will remain  the same: they will have to reduce consumption, switch to lower  quality and cheaper products and goods.

It should be noted that the average exchange rate of the Russian  ruble in Armenia as of April 4 2023 is AMD4.95 /RUB1. At the same  time, in January-December 2022, the average settlement exchange rate  of the ruble in the Armenian foreign exchange market amounted to AMD  6.48.