The U.S. dollar to som exchange rate was relatively stable in 2023. The foreign exchange market was ailing, but not much. The story of 2022, when in just a few hours its exchange rate spiked beyond 100 soms, did not repeat.
Experts predict a gradual strengthening of the U.S. currency in 2024.
This will affect not only the Kyrgyz som, but also the Russian ruble and Kazakh tenge.
24.kg news agency collected the opinions of economists on what to expect from the Kyrgyz som and other currencies in 2024.
What currency rates depend on
The National Bank of Kyrgyzstan traditionally does not give accurate forecasts of what the Kyrgyz som to U.S. dollar exchange rate will be. The central bank reminds that the exchange rate in the country is formed on the basis of supply and demand for foreign currency.
The balance of supply and demand in the domestic foreign exchange market depends on various factors (reasons).
Among them are:
- Economic situation in the republic;
- State of the trade balance;
- Inflation expectations (consumers’ assumptions about price growth in the future);
- Level of confidence and expectations of financial market participants regarding future prospects, which is also related to the current situation of the U.S. dollar in the world financial markets;
- Changes in the level of business activity of Kyrgyzstan’s trading partners;
- Receipts from labor migrants outside the country;
- Seasonal factors: the state of international trade (at the beginning of the year and after the summer period importing companies become more active due to the need to pay for contacts and conclude new ones), income from the tourism industry;
- One-time factors — for example, large state projects requiring payments in foreign currency or conversion of foreign currency by large taxpaying companies in order to replenish the state budget;
- In some periods the situation is influenced by the political situation in the country.
Exchange rate will grow
Analysts of the Eurasian Development Bank believe that in 2024 the average dollar-to-som exchange rate will be 89.7 soms. This is 2.2 soms higher than it was on average in 2023.
In the baseline scenario, the national currency exchange rate will be about 90 soms per dollar in 2024.
Senior Analyst at the EDB’s Country Analysis Center Aigul Berdigulova
An increase in imports against the background of declining inflow of remittances will contribute to this. In the long term, the effect of fundamental factors will cause depreciation of the Kyrgyz som by about 2 percent per year.
The forecast says that already in 2025 the dollar will cross the mark of 90 soms and will reach 92.1 soms on average for a year, in 2026 — 95.6 soms.
What the rate of the Russian ruble will be?
The Russian ruble will also weaken against the U.S. dollar. EDB analysts expect it to be about 92 rubles for $1.
Alexander Abramov, head of the Laboratory for Analysis of Institutions and Financial Markets at the Institute of Applied Economic Research of the Russian Academy of National Economy and Public Administration, said in an interview with Vedomosti that 2024 will be more stable in terms of the ruble exchange rate fluctuations.
The ruble will continue to be affected by sanctions and changes in global oil and gas prices.
Dmitry Kulikov, director of the ACRA Group of Sovereign and Regional Ratings, supposes fluctuations in the currency market in 2024 within 5-10 percent.
Economists and analysts surveyed by Forbes believe that the ruble will balance between 90 and 100 this year, but will be below the three-digit mark. Expensive oil and cooling domestic demand can improve the prospects of the Russian currency, and a slowdown in the global economy and lower prices for Russian exports can push it beyond the conditional red mark of 100 rubles per dollar. New sanctions could become a «black swan».
Tenge will be under pressure
Tenge will not be able to hold its position against the dollar. The Kazakh currency was stable in the last month of 2023. But financiers believe that the pressure will be higher this year.
According to the estimates of the Association of Financiers of Kazakhstan (AFC), the Kazakh currency will be under pressure in 2024.
Zhannur Ashigali, deputy director of ACRA branch in Astana International Financial Center, believes that in the coming year the tenge, being exposed to the external state of market, inflation, will reach the corridor of fluctuations of the rate of 470-480 tenge per dollar.
«2024 will be characterized by some pressure on tenge in the direction of weakening, which to some extent will delay the noted reduction in inflation rates. At the same time, some support for the tenge may be provided by strengthening exports of goods and services of Kazakhstan, a more positive external environment for commodities, and an inflow of non-residents in tenge-denominated assets,» Zhannur Ashigali said.
