Report
Look to Argentina or Turkey to find out what will happen in the Russian economy
Due to the freezing of the assets of the Central Bank of Russia, capital outflows and the cessation of many foreign companies’ activity in Russia, Russia is now experiencing a drastic balance of payments crisis: exchange rate depreciation, albeit followed by a recovery; very sharp rise in the sovereign risk premium due to the threat of default. To estimate the effect on the Russian economy (imported inflation and therefore fall in real income and consumption; fall in investment due to the rise in interest rates and difficulties for banks; loss of export revenues), we can look at economic developments in two countries that have also experienced balance of payments crises in the recent period: Argentina and Turkey. We then find: Transitory shocks (fall in demand and production); Permanent shocks (inflation, increase in the quantity of money, deterioration in public finances).
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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