Oil’s plunge has stung currencies across emerging markets, and there’s probably worse to come. For oil and gas exporters, the impact has been immediate. Even Gulf states with long-standing pegs to the dollar, such as Saudi Arabia, are coming under pressure. Importers like South Africa and Turkey, whose currencies are close to record lows, haven’t been spared either. Brent crude prices have crashed 58% this year to below $30 a barrel — and are within touching distance of their low during the last major slump from 2014-16 — as the coronavirus curbs global demand for energy. The rout accelerated this month when Saudi Arabia triggered a price war after failing to convince Russia to accept coordinated production cuts.
Here’s a look at how different regions are coping:
Europe and Central Asia
The ruble has slumped almost 15% against the dollar this month and Russian local-currency bonds are the third-worst performers among the 25 emerging markets tracked by Bloomberg Barclays indexes. That pressure is one reason why analysts doubt the central bank will lower interest rates on March 20, despite economic growth being slow even before the virus took hold.
Still, the government seems in no mood to mend ties with the Saudis and cut crude supplies. President Vladimir Putin’s decision to fully float the ruble in late 2014 should stand the country in good stead by helping to ease any reduction in the current-account surplus. Russia’s fiscal conservatism in recent years — unusually for a major economy, it runs a budget surplus — will also help. So will the fact that the ruble is undervalued according to real effective exchange rate calculations, which take into account a country’s trade balance and inflation.
Kazakhstan, central Asia’s biggest oil producer, said on Monday it would stop trying to prevent the tenge from weakening after an emergency rate hike last week proved futile. But the currency, which was floated in 2015, has already depreciated 13% in 2020, so further losses may be limited.