What is the devaluation? The situation in Russia

In order to find out what devaluation is, let's look at how this term was formed. This word was formed as a result of joining the prefix "de", which has the meaning "cancellation, loss", and the Latin word "valeo", which can be translated as "cost, have value." Thus, devaluation is the process of losing a part of its value relative to the value of foreign currencies by the national currency. In other words, the devaluation of the ruble is the depreciation of the ruble against international currencies.

The essence of the devaluation

If you want to understand what devaluation is, you need to learn to distinguish this process from the phenomenon of inflation, although it also leads to higher prices. If there is currency devaluation in the scale of the national region, then it is about inflation, and if the depreciation occurs relative to international markets, it means devaluation. And if the inflationary process is very difficult for the state to control, then the decline in the value of the national currency is one of the instruments of the monetary policy of the Central Bank.

Devaluation can be both open and hidden. In the first case, the Central Bank of the country officially declares it, and the exchange of depreciated banknotes follows, or they are withdrawn from circulation. In the second case, the value of the country's currency relative to international currencies decreases. In this case, there is no withdrawal of depreciated money from circulation.

Consequences of devaluation

After we found out what devaluation is, consider the consequences that it has for each of us.

When the value of a country's currency declines, it has both a positive and a negative side. Among the advantages of this process, one can single out the growth of domestic demand for domestic goods, stimulation of exports and a decrease in the spending of the country's gold and currency reserve . However, negative consequences can neutralize all positive aspects.

Devaluation provokes inflationary processes, leads to a loss of confidence in the national currency, a decrease in imports and a rise in prices for foreign goods, raw materials and technology. In banks, there are queues of people who want to withdraw their deposits. The real size of salaries and pensions is falling, and as a result, consumer activity is declining.

Devaluation in Russia

In Russia, the devaluation of the national currency is almost inevitable. According to Sergei Aleksashenko, who is the head of macroeconomic research at the Development Center of the Higher School of Economics, in 2013 Russia's GDP can show only a slight increase of 2%. Under these circumstances, the president's social initiatives can be implemented only if the GDP reaches a level of 4-4.5%.

To date, it is not known which sectors of the economy are capable of giving such growth. The high-tech industry, that is, the manufacture of equipment and machines, is experiencing a severe decline. In the production of pulp and paper products, timber and vehicles, there is also a drop. The remaining industries are in stagnation. Only the commodity sector demonstrates significant growth, but in general it can be said that the industry is experiencing a period of stagnation.

And even with a high oil price in the region of $ 110 per barrel, Russia's balance of payments stability may be shaken already during the current quarter if the balance of payments falls to less than 1% of the country's annual national product. Quarterly, this figure is 4 billion US dollars.

According to the analyst, whenever the balance of payments surpassed less than 1% of GDP for the year, there was a devaluation of the ruble in Russia. However, the expert traditionally refused to quantify the level of predicted fall.

Thus, to see what is a devaluation, most likely, it will be possible in reality in a very short time.