Dollar’s Rate Keeps Growing: How Will Population React?

This week, the official dollar exchange rate in Belarus set a record several times.

No one can say for sure whether the exchange rate will continue to grow. International organizations are revising economic forecasts, while Belarusians are worried about mundane issues, writes naviny.by.

Pandemic Affects Currency Preferences

The coronavirus pandemic led to the closure of borders, the refusal of citizens to travel, the transition to remote work, and a drop in oil demand.

“The world has not seen such a global pandemic since 1918, there is no doubt that the drop in demand (for oil) will exceed the scale of decline during the global financial crisis,” said Pierre Anduran, the manager at hedge fund Andurand Capital Management LLP, Bloomberg reports.

The fall in oil demand automatically leads to lower prices for it. This week, oil prices fell below $ 27 per barrel, although at the beginning of the year oil was more than twice as expensive.

Against this background, the growth of foreign exchange rates in Belarus, where the foreign exchange market depends on the oil situation in Russia, was quite expected. From the beginning of the year and until March 18, the official dollar exchange rate has already grown by 15.8%, the official euro rate - by 13.6%. What will happen next, no one knows for sure.

At the same time, it is already clear to everyone that the changes that have taken place are not just volatility, but the consequences of the global economic crisis (as the European Bank for Reconstruction and Development, for example, now characterizes the situation).

The National Bank of Belarus acknowledged the serious impact of the unfolding processes on the economy on Wednesday, and decided to introduce countercyclical measures in response to the “increased influence of external negative factors.”

Even these international financial organizations (the World Bank and the EBRD), which have put economic forecasts, including those for Belarus, under review, cannot predict how these factors will change.

In the conditions of complete uncertainty, the population (and not only in our country) began to worry about mundane issues, namely, the safety of relatives, access to food, and the preservation of savings (in real terms).

According to a survey commissioned by the National Bank, in February, the tendency of the population to save funds in foreign currency increased markedly, compared to November last year. If in November last year 64.9% of respondents preferred to keep their savings in foreign currency, then in February of this year - 80.6%.

The data of the banks confirm the conclusion that the interest of the population to keep savings in the national currency in the first quarter of this year decreased markedly. According to BelaPAN, in large banks in February the volume of fixed-term ruble deposits either increased by the amount of accrued interest, or even decreased. For the entire banking system, in February, fixed-term ruble deposits increased by only 0.5%.

Meanwhile, last year the ruble deposits of the population against the background of the stability of the exchange rate increased by almost 28%.