Interview: Russian ruble likely to recover in 2 to 5 years: expert

The current downturn of the Russian national currency, the ruble, may be reversed in three to five years, or maybe even earlier, a leading Russian financial expert said Wednesday.

The Russian economy is likely to recover in a longer term after the current downward trend in commodity prices is reversed, Nikolai Podlevskikh, head of the Analytical Department of Tserikh Capital Management Investment Company based in Moscow, told Xinhua in an interview.

"I am convinced that the process will be reversed in longer term -- from three to five years, or maybe in two years. And the ruble will be stronger than it is now," he said.

Elvira Nabiullina, head of the Russian Central Bank (CB), told Russian President Vladimir Putin on Monday that the banking sector was in the safe zone in the first half of 2015 in spite of the impact of external factors.

Meanwhile, the ruble's decline continues. The CB rated it on Wednesday at 64.88 to the U.S. dollar, compared to 52-55 from the end of June to the middle of July.

In addition to Russia's strong dependence on exports of raw materials, Podlevskikh believed that there are other reasons behind the ruble's devaluation.

"The country experiences a crawling inflation caused by rising communal service fees and natural monopoly tariffs, which push down abruptly the purchasing power of the ruble and its rates against other currencies," he said.

External blows include low oil prices, additional Western sanctions and political tensions related to the Ukraine crisis, he added.

The ruble's depreciation has produced different influence on different sectors, the expert said.

Companies like those in the telecoms industry have gained their revenues in rubles, but they still have to import equipment and pay in currency. The same applies to small companies, especially those in the trade sector, which have to keep large money reserves as a means of hedging against changes in the ruble's exchange rates, he noted.

According to the expert, exporters benefit from the cheaper ruble. It is known that sometimes exporters do everything in their power to keep the national currency low and even initiate devaluation.

"In the 1990s, our exporting companies strongly lobbied for the ruble devaluation. And there was also devaluation in the beginning of 2000s. This provided strong support to exporters of oil and other commodities. It happens that the lion's share of exporters' expenses is in rubles, while their revenues are in foreign currency," Podlevskikh said.

He believed the nationwide campaign to substitute imports, launched by the Russian government, may only be efficient in a short term in sectors like agriculture with short-cycle operations, which enable quick economic turnover.

"Lamentably, most of our economy has much longer cycles. Therefore, substitution of imports in important sectors like extraction of hydrocarbons, which use imported equipment, is a lengthy process," Podlevskikh said.

Podlevskikh predicted that the decline in commodity prices, which has resulted in further depreciation of the ruble, will continue for some time.

"In autumn, we will see new lows in oil and metals prices, and gas prices will follow," he said.

However, Podlevskikh is convinced that the process will be reversed in the longer term, after commodity producers are forced to cut output. The oil sector has already felt a shortage of investment and is reducing drilling operations, and the same will happen to other sectors, he said.

"The ruble will be stronger than it is now, and we may expect recuperation in the Russian economy," Podlevskikh said. Endi