MOSCOW: Russia’s rouble is on a roller-coaster. After being the world’s second worst-performing currency against the dollar last year, it is among the best in 2015.

That will help keep a leash on inflation, to the relief of millions of Russians. But it is worrying one part of the economy — the local industry that had seen demand grow for its Russian-made goods when the falling rouble made imports hugely expensive.

Russian sectors, from building materials to craft beer, took advantage of the rouble’s drop to undercut better-known imported rivals and gain a bigger domestic market share.

Nikita Filippov, co-owner of a St. Petersburg-based craft brewery, says it was a godsend.

“European beers finally hit the price roof, and bar owners realised that they can’t raise their menu prices any more as the beer would become unaffordable,” he says. “That was a crucial moment when the bar owners had to reconsider their profit margins for the first time in many years, and that was the time when they turned their faces to local craft breweries.”

The government has championed such trends, hoping to get something out of the rouble’s dramatic drop last year. One focus is the construction materials sector, as the country prepares to build World Cup venues.

Oil companies were also helped, as they sell their product for dollars but have many expenses in roubles, helping to temper the financial pain from lower crude prices. Now the currency is on the rise again and the government — which only months ago was desperately trying to support the currency — is intervening in markets to keep it from strengthening much further.

After plummeting to nearly 80 roubles against the dollar during panic selling in December, the rouble has recovered to trade at 52.6 per dollar on Friday. That’s still over a third below its level in January 2014, meaning local industry still enjoys some of its competitive advantage over imports.

Russian craft beers on tap, for example, sell for 150 to 200 roubles ($3-4) for a half-litre in Moscow bars compared with 300 roubles ($6) for the imported German and Belgian brands, which have so far dominated the premium segment.

Demand for Russian craft beer is now twice as high as supply, Filippov estimates. He says costlier imported hops forced him to raise prices by 10-15pc in Dec, but that rise is smaller than price hikes for imported rivals.—AP

Published in Dawn, May 30th, 2015

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