Russians take ruble plunge in stride as economy adapts to war

Panic buying? Bank runs? Not at all — it’s business as usual in Russia.

The ruble’s latest plunge isn’t triggering the kind of anxiety associated with a typical currency collapse in the country, as President Vladimir Putin’s ongoing invasion of Ukraine extends past the 18-month mark, Bloomberg reports.

The last time there was a crash — after the onset of the war in February 2022 and ensuing international sanctions — Russians were scrambling to buy cars, washing machines and even sanitary towels, diapers and coffee capsules. This time around — at least so far — there has been no evidence of a repeat.

“Typically, it’s in Russian DNA to track what is happening with the ruble-dollar rate,” said Denis, 46, a factory worker from the Lipetsk region, south of Moscow, whose small business collapsed last year. “Still there are worse problems now and I don’t think it will affect my daily life further.”

The ruble, the third-worst performing currency this year in emerging markets, broke through 100 per US dollar on Monday. That forced Russia’s central bank to call an extraordinary meeting to hike the benchmark rate to 12 per cent from 8.5 per cent. Authorities are also considering further capital-control measures. The currency traded at 96.64 as of 2:12 p.m. in Moscow on Wednesday.

Such an attitude shows how quickly Russian life has adjusted to wartime.

The drafting of hundreds of thousands of people to the armed forces, constant drone attacks, including on Moscow, and Wagner mercenary leader Yevgeny Prigozhin’s failed uprising in June are among new things Russians may be worried about. Another factor is a lot of ruble savings accounts have been wiped out by previous crashes, while some active members of the population have departed to other countries.

After a period of volatility in the post-Soviet 1990s, the currency broadly stabilized after the start of Putin’s leadership in 2000 — supported by the strong price of oil. That changed abruptly following his annexation of Crimea in 2014, when the currency crashed by 50 per cent, making it the worst performer of that year among more than 170 currencies tracked by Bloomberg.

The central bank also held an emergency nocturnal meeting on that occasion, announcing the largest single interest-rate increase since 1998. The currency depreciated again shortly after Russia invaded Ukraine, but rebounded quickly as Russia imposed measures, including capital control.

This Time Around

Only about 60 per cent of Russians think the ruble rate is affecting their income now and about a half do not track it at all, according to an Otkritie Bank survey published this week.

“The rate itself worries a small part of the population, especially those who have savings. And now there are fewer of them, maybe about 10 per cent,” said Denis Volkov, a sociologist at Moscow’s independent Levada Center.

Better-off Russians in bigger cities, such as Moscow or St Petersburg, are more unhappy.

Estate agents in the capital are seeing many clients cancel property sales at the last minute as homes and apartments are seen as a form of protection from currency devaluation, according to two Moscow realtors. Tourism has also suffered, as people cancel plans to go to Türkiye or other popular destinations as the ruble makes the cost prohibitive, according to the owner of a tour firm in Moscow.

“I have some money in the bank for a down payment on a studio, but the payment is almost 50,000 rubles ($517) on a mortgage if the apartment costs 6 million rubles,” said 38-year-old Muscovite Olga, who has a monthly salary of 100,000 rubles. “With the current ruble rate it is not really clear where it is all going.”

Banks are making it harder to keep euros or dollars in accounts and transfer funds overseas. A number of international consumer-goods companies have left the country, meaning prices, including for imports, has been affected — though not enough to cause unrest.

Rising GDP

Yet the weak ruble hasn’t prevented Russia’s GDP from expanding 4.9 per cent in the second quarter, ending four periods of contraction. The growth was higher than forecast and indicates the economy is on track to return to its pre-war level as soon as next year as it adapts to the impact of international sanctions.

“The ruble rate has not yet affected my life style,” said Sofia, 40, a teacher from Voronezh, in southwest Russia. “It is still concerning, but comparing it to the war and possibly mobilization, this is nothing.”