Page 59 - RusRPTJun21

surplus rose $11.3bn in April, reaching $28.1bn in 4M21, the same as in 4M20. At the same time, the trade balance gained only $8.1bn, which is below seasonal patterns ($13.7bn in 2010-20).
The rapid rebound in demand for imported goods offset the recovery in exports, but the lack of substantial tourist flows eased the pressure from the services deficit on CA.
Private capital outflows have eased, but the active accumulation of reserves substituted for this thanks to higher oil prices. We think that the preliminary data continues to point to a strong rebound in GDP (we expect growth of 3.4% y/y in 2021), but the active accumulation of reserves will likely interfere with the ruble’s appreciation on the back of fundamentals given the persistent execution of the fiscal rule.
The reduction of the geopolitical risk premium and general EM risk-on sentiment should be ready for a stronger currency.
CBR has released its preliminary monthly BoP estimate for 4M21. The estimate shows that the CA surplus rose $11.3bn in April, reaching $28.1bn in 4M21, the same as in 4M20. At the same time, the trade balance gained only $8.1bn, which is below seasonal patterns ($13.7bn in 2010-20). According to CBR, the rapid rebound in demand for imported goods dragged down the trade balance, offsetting the recovery in exports. At the same time, CA was stronger than seasonal patterns (typically at $6.9bn) thanks to the lower services deficit, as outbound travel was limited.
As for financial accounts, net private flows dropped to $18.7bn vs. $28bn in 4M21. The rise of capital outflows in April was in line with seasonal patterns ($6.9bn vs. the typical level of $6.6bn and the figure of nearly $10bn in 2020). Apart from 2020, banks decreased their lending to the external sector (negative liabilities), while most outflows were built up from non-financial assets. Capital outflows were offset by the active accumulation of reserves, which added $9.5bn in 4M21 vs. $2.6bn in 4M20.
The preliminary data is still in line with our expectations (CA surplus of $23.7bn in 2Q21). This is mainly due to better oil prices (support for exports) and the better services balance despite tourism still underperforming. We think the preliminary data continues to point to a strong rebound in GDP (we see growth at 3.4% y/y in 2021), but the active accumulation of reserves will likely interfere with the ruble’s appreciation on the back of fundamentals given the persistent execution of the fiscal rule. In our view, the reduction of the geopolitical risk premium (the 2020-21 premium has fallen from nearly RUB8 in mid-April to RUB5) and the general EM risk-on sentiment should be ready for a stronger currency. We maintain our YE21 forecast of a RUB/$rate of 72.1.
59 RUSSIA Country Report June 2021 www.intellinews.com