MOSCOW — As the ruble strengthens to levels not seen in seven years, Russia’s economic development minister warned on Wednesday that businesses in the country could suffer if the trend continues.
The ruble hit all-time lows in the first few weeks after Russia sent troops to Ukraine in late February, falling as much as 50% to 150 against the US dollar. It then started to recover and this month reached its highest exchange rate since May 2015.
On Wednesday, the Russian Central Bank’s official exchange rate was 52.9 to the dollar. Although the rate is seen by some as a sign that Russia is resisting Western sanctions, the strength of the ruble is making Russian exports more expensive.
“I think my colleagues will confirm that the profitability of many industries, even export-oriented, has turned negative at the current exchange rate,” Economic Development Minister Maxim Reshetnikov was quoted as saying by Russian news agencies.
“If such a situation continues for several more months, I believe that many companies may have the idea not only of reducing investment processes, but also of the need to adjust current production plans and reduce production volumes. production,” he said.
Central Bank President Elvira Nabiullina suggested this month that Russia should broadly reorient its economy away from reliance on export earnings.
Analysts say the ruble’s strength reflects high global oil and natural gas prices and wide-ranging sanctions mean Russia is buying fewer imports.