Introducing the rouble's free float has mitigated the impact of the oil price shock on the Russian economy much better than in the 2008-09 crisis.

The economy contracted 3.4% y/y in H1 15, better than the market expected. However, given the continual fall in the oil price, models show that the rouble is currently still overvalued, which is weighing on fiscal stability.

The oil price has fallen dramatically in rouble terms this year, jeopardising budget execution, as the gap between boosting expenditure and shrinking revenues is widening.



"We remain bearish on the rouble reiterating our current forecasts for the USD/RUB published last week: 70.00 (3M), 72.00 (6M) and 70.00 (12M). We increase our EUR/RUB forecasts from 74.20 to 77.00 (3M), from 77.76 to 79.20 (6M) and from 77.00 to 80.50 (12M)", notes Danske Bank