with depreciation of Russian currency, many imported products become expensive in terms of Russian currency, like electronic products(TV, Smartphones), cars, food, blabla. this will also push Russia's price to grow.
In theory you are correct if they play a large role in Russia's overall conusmption. However out of the large Russian Economy, they import about 300 billion USD total in 2014 (and it may halve this year). That too large amounts of this trade were conducted/are being conducted in Ruble/other currencies where the depreciation effect was not so terrible.
In fact to have a proper picture we need to do a weighted trade study by % trade relevance to get a better picture on the effect on Russia's WPI and CPI from increased import cost (and not just go by RUB/USD depreciation % since this trade is not 100% of Russia's trade by currency).
The impact has also been mitigated by Russia's forex reserves they have accumulated over the commodity/oil boom preceding this year....since the stockpiles of USD and other major countries can be released at the appropriate rate rather than solely using the Ruble to continuously convert into fresh USD/Yen/Euro/Yuan etc...This is why you can see the Russian total forex dropped from about 450 Billion USD in total to about 320 billion USD at its lowest.
Cheaper currency through depreciation also makes a country's exports cheaper on world markets helping to offset the impact of more expensive imports. However Russia is dependent on commodity exports so cannot take much advantage of this. But they are not a super-reliant country on trade %wise.
All this means IMF has predicted relatively low inflation for Russian consumer:
Report for Selected Countries and Subjects
An average of about 6% yearly till 2020.
So an assumption/implication that everyday prices in Rubles will somehow shoot up to the same extent that the Ruble has depreciated versus foreign currencies is plain wrong.
So combined with the GDP still holding and even growing in Ruble terms and purchasing power impacted very marginally...the situation is not so full of doom like some are painting here.
Nominal GDP measured in US dollars has limited use when domestic consumption and investment are concerned.
When you have high export/re-export/import reliant countries where trade forms more than 50% of GDP and even more than 100% and 200% in cases like HK, Singapore, Malaysia....yes these countries are very prone to depreciation and capital flight from market jitters and speculation (look at asian financial crisis for example). China is not so extreme like this but it is definitely up there given the economic model it has pursued over the last few decades and the resulting economic structure that is only now slowly transitioning (somewhat inevitably).
This is also part of the reason China Nominal USD figures look good compared to its PPP and the reverse is true for other countries where their trade situation/integration has been affected due to mass depreciation (Russia, Brazil) or where the trade situation/integration is still in an earlier phase of development (India).
I will repeat it again for all that think Western Sanctions have had a massive effect on Russia. Yes you have hit their elites where it hurts in many places...and you have hit the aggregate of their economy measured in US dollars (which is not a Russian currency however)....but the Russian economy in Ruble terms remains stable and solid for the average consumer...they have entered recession but it has been mitigated by low inflation, solid stable purchasing power and inner resilience of economic fundamentals and forex reserves.
Does the average Russian care so much about his/her economy now being ranked/valued much lower in USD terms? Only if they are holding massive amounts of captive wealth that they dont spend (aka elite) and which they traditionally use to buy foreign currencies etc...and they are a tiny fraction of the population.
Russia and Brazil have so far managed the impact of this recession for the large part of their domestic society which is why their purchasing power has not degraded by any significant amount....neither are they experiencing massive inflation.
Those 2 things are much more important to the common person than how much their rubles are worth in US dollars...and where their economy ranks in US dollars. With these 2 things under control in both countries....is the reason you dont see major rioting and revolution...and why Russia even has the political and economic buffer to wage war in Ukraine and now Syria.
It's a insult to Brazil and Russia...And the other countries.....
I dont feel happy with the thread...
Hope this post helps!
Now that will be interesting.
