Russia: a brief market watch

RUSSIA ECONOMICS - In Brief 11 Sep 2025 by Evgeny Gavrilenkov

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The ruble's performance on the FX market has been a major talking point over the past couple of weeks, with its sudden 5.7% depreciation against the dollar since early September, hovering around USD/RUB 85 in recent days. Fundamentally, this isn't surprising, as the ruble remains as strong in real terms as it was in 2015 (barring some 2022 fluctuations). A few weeks ago, the government set the obligatory repatriation of FX proceeds by exporters to 0%, which allowed the ruble to move and theoretically increased its potential volatility. Additionally, markets are anticipating a significant key rate cut, making ruble savings less appealing to exporters. While the ruble's weakening appears modest from a fundamental perspective, it supports federal budget revenue and helps manage the budget deficit.The government is set to release the 2026 draft of the federal budget later this month. Minfin's initial comments suggest it will be structurally balanced, calculated as the difference between revenues based on oil prices at $59 per barrel and expenditures excluding debt servicing. However, despite similar plans last year for the 2025 budget, the deficit this year could still reach 2.2-2.4% of GDP. To address this, the government intends to expand its borrowing program, though the exact amount of additional OFZ issuance remains unclear. This could potentially exert further pressure on the yield curve.August turned out to be more deflationary than anticipated, with CPI dropping by 0.4% m-o-m. It's worth noting that the monthly CPI uses a broader consumption basket compared to weekly inflation figures. Y-o-y inflation hit 8.14%, with hopes for further disinflation. The YTD inflatio...