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estimate for 4Q16. Analysts expect the current account to total 2.2% of GDP this year, or $32bn, with an average USDRUB exchange rate of 61.6 if Urals averages approximately $52/bbl.
The narrower CA surplus was due to import recovery. O f the $6.8bn y/y decline in the CA surplus in 4Q16, $4.3bn came from the pick-up in goods imports, which stood at $55.1bn.
Goods exports were down $1.1bn, w ith the major contributor being non-oil & gas exports, while oil & gas exports were almost flat, in dollar terms, on an annual comparison.
Trade deficit in services still shrinks, w hile investment income deficit widened. The chronic deficit in the services trade has continued to narrow and reached $19.2bn, declining $1.4bn y/y.
The investment income deficit widened $2.1bn y/y to $8.3bn o n the back of both USDRUB appreciating and increased non-resident OFZ and other assets holdings.
The financial account has, to a significant extent, been a reflection of the last major 2016 privatisation deal: In 4Q16, it likely contributed to both the spike in the direct investment in the non-bank private sector (which rose to $15.2bn, its highest since 1Q13, which was also the result of a major deal) and the $11.7bn increase in the ‘other assets’ holdings of this sector (also above its typical range for 2010-16). According to local news sources, the deal might spill over into the 1Q17 BoP statistics too, most likely due to the reclassification of the ‘other assets’ of the non-bank private sector into another class.
Otherwise, net private capital outflows picked up slightly to $6.4bn in 4Q16 , from $1.4bn the quarter before, on the banking sector’s continued external deleveraging (external liabilities down $7.5bn) and the pick-up in grey capital outflows (dubious operations were $11.7bn, while errors and omissions contributed $1.8bn). Thus, the annual total was $15.4bn, down from $57.5bn in 2015.
International reserves softened on the CBR’s YE liquidity support. The BoP report shows that the CBR’s reserve position lost $1.8bn over 4Q16, which is a result of extending the FX repo limits at the last auctions of the year (on 26-27 December). That added $1.1bn compared with the end of 3Q16, with the remainder accounted for by the FX swap facility.
5.2.1 Import/export dynamics
Analysts were alarmed that a sustainable overall trend towards imports recovery could lead to the narrowing of the current account surplus without growth in oil prices, in turn posing currency exchange risks towards end-2016.
Imports to Russia in 2016 increased by 5.4% y/y in machinery and equipment to $86bn (47% of total), possibly linked to the recovery of investment in industry helped by the strengthening ruble at the end of the year.
The decline in imports of chemicals was minimal at 0.6% y/y to $33.8bn
43 RUSSIA Country Report February 2017 www.intellinews.com