The consequences of the US election scheduled for November 3, 2020, and the trade war between the United States and China may adversely affect the Russian economy, according to experts interviewed by TASS.
"On the one hand, the Russian economy might face negative influence from economic turbulence, and on the other hand, a slowdown in the global economy and a corresponding decrease in demand for raw materials due to the US-China trade war," Director of HSE Centre for Business Tendencies Studies Georgy Ostapkovich believes.
Geopolitical risks rise
Associate Professor at the Department of Stock Markets and Financial Engineering at RANEPA Sergey Khestanov believes it is likely that the United States will try to tighten trade restrictions against China amid pre-election discussions, which will reduce global demand for raw materials.
"The United States is approaching the presidential election in conditions of a significant economic downturn and a strong polarization of society. All acute political issues are becoming the subject of the pre-election debate. Against this background, attempts to tighten trade restrictions against China are very likely. For Russia, this is a negative factor, since it would lead to a decrease in trade between the US and China, reducing, as a result, global demand for raw materials," he said.
According to the expert, an additional risk factor is associated with the possible tightening of anti-Russian sanctions, which is very likely if a candidate from the Democratic Party wins the election. "However, any effects should not be expected until early 2021, when the president-elect takes office and forms a new administration," Khestanov said.
Geopolitical risks for the Russian economy are becoming relevant again, Head of Analytical Department at Zenith Bank Vladimir Evstifeev said. "The victory of a Democratic candidate in the US presidential election creates increased sanctions risks. Joe Biden is already speaking in favor of a tough foreign policy towards Russia," the expert added.
Public debt sanctions would weaken the ruble
US election is not the most significant factor affecting the exchange rate of the Russian currency, Khestanov said. "The influence of the oil market and the budget process is much stronger. The basic scenario includes a smooth depreciation of the ruble by 5-7% by the end of 2020. However, any significant events related to the dynamics of the oil market and/or changes in budget policy will necessitate a reviewed forecast," he believes.
According to Evstifeev, the main risk is possible sanctions by the United States imposed on the ruble public debt. "In the context of stimulating budget policy, the Ministry of Finance announces an increase in domestic borrowing, so sanctions on OFZs may violate the plans of Russian financial authorities. In turn, this will negatively affect the dynamics of the ruble, which could lose 10-15% after such sanctions. The weakening of the ruble traditionally spurs inflation and will continue to negatively affect such components of GDP as final consumption and investment," he said.
Experts agree that it is beneficial for Russia that large economies - the United States, China, and the European Union - develop. "The weakening of the Chinese economy as a result of friction with the United States will lead to a decrease in demand for Russian exports," Evstifeev said.
"If the economy develops, there will be an increase in demand for fuel. It is beneficial for Russia that the economies in the United States, China, and the European Union develop," Ostapkovich agreed.
According to Asset Manager at Otkritie Dmitry Kosmodemyansky, Russia's neutrality in relations between the United States and China can help the Russian economy. "There are many examples of such benefits due to non-interference in a big conflict. However, against the background of a tough economic restructuring due to global quarantine, we may not notice this effect to the tune of a few decimal percent of GDP growth," the expert believes.