Immediate impacts of US election results on the Russian economy appear minimal

BOFIT Viikkokatsaus / BOFIT Weekly Review 2016/45

The immediate fallout from announcement on Wednesday (Nov. 9) morning of Republican presidential candidate Donald J. Trump’s victory increased uncertainty on global financial and commodity markets. Russian markets for commodities, forex and equities all fell at their openings, but recovered as the morning progressed. Over the longer term, the current uncertainty surrounding the Trump administration’s economic and foreign policies makes it difficult to foresee impacts on the Russian economy. During the campaign, the discussions covered, among other things, free-trade agreements, new customs barriers, cutting taxes, European security, sanctions on Russia and geopolitical tensions.

Crude oil prices and the ruble’s exchange rate have depreciated in recent weeks. The price of Brent crude oil, which peaked at $51.60 a barrel on October 10, saw its subsequent drop accelerate already before the race was called for Trump. This morning (Nov. 11), the price of Brent crude was close to $46 a barrel, a decline of about 9 % from a month ago. The price of Brent oil has risen by more than 70 % since it hit a low of $28.70 on January 19.

The ruble’s external value tracks oil prices. The fall in the Brent price over the past month has been reflected in a 3−4 % weakening in the ruble’s exchange rate. This morning (Nov. 11), the ruble-dollar rate was about 65 and the euro-ruble rate about 71. The ruble has strengthened about 30 % against the dollar and euro since its record lows in late January.

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