Page 62 - RusRPTFeb21

5.2.2​ Current account dynamics
According to the Bank of Russia’s preliminary estimate, in 2020 the current account surplus in the balance of payments of the Russian Federation decreased by half compared to the previous year and amounted to $32.5bn.
The main factor behind its change was the weakening of the trade balance due to the decline in the value of main Russian export goods as a result of the deterioration of the international market conditions with a simultaneous reduction in imports in much smaller volumes. Reducing the deficit of its other components, primarily the balance of services and the balance of investment income, had a leveling effect on the dynamics of the current account.
Financial transactions balance of private sector in 2020 amounted to $47.8bn compared to $22.1bn in the previous year. Different from 2019, when transactions to increase foreign assets played a significant role, last year the main form of net lending to the rest of the world by the private sector was a reduction in external liabilities, formed in almost equal proportion by banks and other sectors.
International reserves decreased by $13.8bn mainly due to net foreign exchange sales by the Bank of Russia under the fiscal rule, as well as the repayment of sovereign external debt.
Russia's current account surplus was relatively strong in 4Q20 ​on merchandise exports and services imports, which is a positive sign for 1H21. Merchandise imports, however, proved sticky despite ruble depreciation, highlighting risks for 2H21, when the FX market will be more vulnerable to capital flows, and those remain volatile Current account to remain well supported in 1H21.
Russia's current account surplus totalled $32.5bn in 2020 (including $5.5bn in 4Q20), which is $4.5bn lower than we expected and half the 2019 surplus of $64.8bn. Nevertheless, we are not in a rush to take the numbers negatively. Looking into the structure of the 4Q20 current account, we see a number of positive developments.
Non-fuel revenues growth showed a slight pick-up to 5% y/y in 4Q20 (Figure 1) on continued strong exports of gold and agriculture products, benefiting from favourable crops and a lack of internal demand for gold from the Bank of Russia. The full-year result of flat non-fuel exports in Russia in 2020 may appear unimpressive, however, it does represent an improvement vs. the 32% drop in 2009, and 17% decline in 2016, suggesting lower dependence on pro-cyclical ferrous metals and manufacturing products.
62 ​RUSSIA Country Report​ February 2021 ​ ​www.intellinews.com