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Russian Economy to Rebound in 2015 if Ukraine Crisis De-Escalates:Saxo Bank

© Sputnik / Alexei Filippov / Go to the mediabankAccording to the chief economist and investment officer at Saxo Bank in Denmark, by the summer 2015 the current situation in Russian economy will improve.
According to the chief economist and investment officer at Saxo Bank in Denmark, by the summer 2015 the current situation in Russian economy will improve. - Sputnik International
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According to the chief economist and investment officer at Saxo Bank in Denmark, by the summer 2015 the current situation in Russian economy will improve.

The Russian Finance Ministry believes the ruble is extremely undervalued and has begun selling its currency reserves in the market, the ministry’s press office said Wednesday. - Sputnik International
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MOSCOW, December 17 (Sputnik), Nastassia Astrasheuskaya — Russia’s falling economy may rebound by June 2015 if Moscow takes steps to de-escalate the Ukrainian crisis and imposes capital controls on the market, Steen Jakobsen, chief economist and investment officer at Saxo Bank in Denmark, told Sputnik Wednesday.

“The whole thing is about Ukraine. If the Ukrainian crisis were to de-escalate, that would take pressure away from Russia. It may be naïve right now, but if everyone agrees that Ukraine is a buffer between Russia and Europe, Russia and NATO, then I think you could see an improvement,” Jakobsen said.

“It will be a long winter, but by the summer, the crisis should be over,” he emphasized.

The dollar and euro had risen 20 to 26 percent against the ruble by 3:18 p.m. in Moscow on Tuesday, as panic-stricken investors deserted the Russian currency in droves. - Sputnik International
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The markets’ reaction to the Russian Central Bank move to hike a key interest rate to 17 percent on Tuesday pulled the ruble to an all-time low against both the dollar and the euro and hinted at the possibility of a financial crisis.

“This wasn’t a wise move [on behalf of the central bank] at all. It only showed the Russian Central Bank was desperate. It was a red color for the bull,” Jakobsen said.

“Russia is already in an economic crisis. A financial crisis is characterized by the lack of liquidity, and we are getting close to that in Russia. It will be hard to get foreign currency in the country. The economic crisis may now lead to a financial crisis,” he added.

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Aside from the economic policies, the Russian economy is feeling the impact of Western sanctions imposed on Moscow over its alleged involvement in Ukraine as well as a sharp decline in oil prices, which represent more than half of the country's revenue.

Russia has suffered the heaviest blow to its stock market, which is now the cheapest in the world. But it was not the only energy-based economy to feel the effect of oil prices dropping below $60 per barrel. Norway’s krone lost some 4 percent against the euro on Tuesday, a significant amount even if a fraction of the ruble’s 20 percent fall the same day.

The Saxo Bank economist said the ruble would most likely remain volatile in the short-term, trading up and down without much recovery or fall, although a financial collapse remains more likely than a full recovery, he said.

The Russian ruble nosedived on Tuesday trading at 80 rubles to the dollar and 100 to the euro. - Sputnik International
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“The favorable forecast with a fully stable ruble is unlikely. I’d give 70 percent chance to the scenario where the ruble will trade up and down within a norm, and a 20-percent chance to the ‘Goodbye Russia’ scenario – that of a collapse,” Jakobsen said, adding that to achieve the ‘norm,’ the government must implement capital controls.

Russia is following the paths of Iceland and Cyprus, both of which managed to lock in assets using capital controls. Such government regulations of capital inflows and outflows would allow for a warmer business climate, he said.

“We need to see business people flying in and out of Russia, now it is politicians and I have not seen a politician ever achieve anything that is good for the economy in my whole career,” Jakobsen said.

Saxo Bank has been in business since 1992 and specializes in online trading and investment across global financial markets.

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