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WRAPUP 1-Russia's Putin: Rouble will not collapse

Published 03/04/2009, 01:47 PM
Updated 03/04/2009, 01:48 PM
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* Putin says the rouble will not collapse

* C.bank says macro situation stabilised

* C.bank sees zero capital outflows in March

* February inflation at 1.7 percent - Ifax

By Yelena Fabrichnaya and Gleb Bryanski

MOSCOW, March 4 (Reuters) - Russia's Prime Minister Vladimir Putin said on Wednesday there would be no sharp drop in the rouble's exchange rate, echoing optimism from the central bank which forecast a stabilising economy over the next few months.

"(The rouble) will not collapse," Putin said in comments televised hours after the deputy head of the central bank told Reuters that Russians have already gotten used to their currency's sharply lower exchange rate.

Over the course of several months, the bank eased the currency's value down by a quarter relative to a dollar/euro basket in response to a sharp drop in the price of oil, Russia's main export commodity.

That move caused many Russians to change their savings into dollars or euros, fearing a total collapse of the home currency. It has also been expected to push Russia's trade balance into negative territory.

But on Wednesday, Alexei Ulyukayev, first deputy chairman of the central bank, told Reuters that the tide of capital outflows had largely been stemmed and the macroeconomic situation would stabilise.

"The central bank is certain that in the near future there are no planned changes (to the rouble exchange rate) and there are so far no reason for them," Putin said in remarks shown on Russia's Vesti 24 television news channel.

Another persistent headache for the Russian public -- inflation -- also appeared to be stabilising on Tuesday.

For February, it amounted to 1.7 percent, Interfax quoted a government source as saying. This is higher than the 1.2 percent seen in the same month of last year, but much lower than in January, when it jumped 2.4 percent month on month.

The rouble has remained largely stable after the central bank called an end to the gradual devaluation in January and set a floor at 41 to the basket, provided the oil price does not fall to $30 a barrel and stay there.

A Reuters poll last month showed futures for Brent crude would average $52 a barrel in 2009, giving a glimmer of hope to Russia, where the government is struggling to review 2009 budget based on an average price for Russian oil at $41 a barrel.

INTEREST RATE CUT

Ulyukayev said net private capital outflows fell to $4.5 billion in February from $29 billion in January while the trade surplus stood at $16 billion and the current account surplus at $9.4 billion in the two months.

The devaluation and economic contraction led to a sharp fall in Russian imports, which were booming in recent years, and stabilised Russia's balance of payments after a shocking fall in oil prices.

"The hypothesis that we will have a sustainable trade surplus of dozens of billions of dollars this year is being confirmed," he said, adding that the central bank also expected capital outflows to be close to zero in March.

"I think the period of intense capital outflows is mainly over," he said. A trade surplus coupled with little capital outflows will support the rouble.

He said expectations of further devaluation have ebbed, with the share of bank deposits in foreign currency stable in February, while the banking sector's foreign currency denominated assets were down by $15 billion.

The central bank supports the rouble through high interest rates and tight liquidity, prompting criticism from industrialists who complain about prohibitive lending rates stifling their enterprises.

Ulyukayev said the central bank needed more time to study the impact of the rouble devaluation on inflation before it could start cutting interest rates and said the balance of payments data for the first quarter was a key indicator.

"If the trends I am talking about continue and I am convinced they will continue, we will have grounds to take such important decisions (such as an interest rates cut)," Ulyukayev said. (Editing by Andy Bruce)

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