On Russia’s Balance of Payments

In early October the RF Central Bank published an assessment of Russia’s balance of payments for 9 months 2011.

The same trend remained in the current account balance, which was characteristic of the first six months of this year. Specifically, the current account balance by the end of July-September went down by 27% in comparison with April-June, although went up 3.2 fold against the same period 2010. The fall of the current account balance in 3Q resulted from some decrease in export of goods (-3.3% against the previous quarter) with simultaneous growth of import of goods (+3.5% against the previous quarter). At the same time, significantly grew the negative balance of trade in services, which exceeded by the end of July-September $12 bn. This represents the absolute quarterly maximum in the history of the Russian Federation. It should be noted that the fall of the negative balance of investment revenues by 13%. This, most likely, resulted from the repayment of debts by Russian companies, which reduces the cost of its service. 

A distinctive feature of Russia’s balance of payments in the 3Q was sharp abrupt expansion of negative balance of financial accounts, whose size, compared to the 2Q, went up by 2.2 fold and reached $21.7 bn. At the same time, for July-September the capital flight from Russia constituted $18.8 bn, and for 9 months 2011 – $50.1 bn. Obviously, instability of the international financial markets was the main reason for the acceleration of capital flight. Major reason for an increase of net outflow of capital was not growth in foreign assets of residents, and virtually zero growth of their liabilities to nonresidents: when for six months of this year liabilities of the private sector to nonresidents went up by $41 bn, for the 3Q – by only $0.8 bn. On the one hand, this speaks about a fall in the volume of foreign borrowings by Russian companies, and on the other hand, about a reduction of foreign investments in the Russian Federation.

In the wake of high instability on the world financial markets, the outflow of private capital from Russia in the 4Q, most likely, will continue and will exceed the sum of $35 bn forecasted by the Central bank of Russia for 2011. The rates of import in the 4Q may slow down due to a fall of the Ruble exchange rate. This in the event of oil prices staying at around $100 per barrel will maintain positive the current account balance.

P.V. Trunin - Candidate of Economic Sciences, Head of the Monetary Policy Department