Page 64 - RusRPTAug21

CA stood at $19.9bn, in line with consensus expectations.
This time, the recovery in exports outpaced imports on both goods and services, especially in energy segment. The CA surplus was counterbalanced by the CA surplus with an increase in reserves, while private and public capital outflows eased. We expect the CA surplus to reach $82bn (4.8% of GDP) in 2021 vs. $36bn (2.4% of GDP) in 2020 on a further strong rebound in exports in 2H21 and constrained demand for travel. The execution of the fiscal rule is unlikely let the ruble to appreciate, even with higher oil prices, but better EM sentiment by YE21 could bring the currency to RUB/$70.2 by YE21, we think.
The CA stood at $19.9bn, which was in line with consensus expectations, but lower than our estimate. It fell from $23.2bn in 1Q21 but was higher than in 2Q20 ($1.6bn). The rebound in goods balance ($34bn in 2Q21 vs. $28.45bn in 1Q21 and $16.7bn in 2Q20) was met by a narrowing of the services deficit ($1.3bn in 2Q21 vs. $2.3bn in 1Q21 and $1.9bn in 2Q20). The investment income deficit rose on a y/y basis ($12.3bn in 2Q21 vs. $11.4bn in 2Q20) on a shift in seasonality: SOE banks paid their dividends in May-June vs. autumn last year.
The recovery in exports outpaced imports on both goods and services: the 19% SA q/q recovery in goods exports offset the 9% SA q/q rebound in goods imports. Oil & gas exports grew by 33-35% SA q/q on the back of better volumes and higher oil prices; services imports were in the red for a second quarter in a row (-3.5% SA q/q in 2Q21 vs. -9% SA q/q in 1Q21).
On the financing side, the main contribution came from the non-financial sector ($13.5bn), as well as the accumulation of reserves ($8.3bn), the financial sector balance pointed to an inflow of $4.3bn on the sale of FX assets. The net outflows of non-residents from the public sector appeared to be marginal ($1.5bn), as the main risk-off impact to sovereign debt came in 1Q21 ($3.6bn).
The 2Q21 BoP data showed a divergence between the recovery of global trade, the rebound of the domestic economy, and the still constrained opportunity for travel. The strong domestic rebound continued to push a demand for imports, but we see signs of moderation. The higher inflow of hard currency from broader trade activities was met by a rising reserve accumulation on the back of the fiscal rule that let the ruble appreciate marginally, by 0.3% q/q.
Going into 2H21, the key question remains the recovery of travel abroad, which is in full swing from last week (flights resumed with Turkey), and whether it remains sustained with the spread of new strains of COVID-19. Also, higher oil prices on OPEC+ not increasing supply could further support the elevated level of the CA. We see the CA surplus at $82bn (4.8% of GDP) this year vs. $36bn (2.4% of GDP) in 2020. The execution of the fiscal rule is to let the ruble appreciate, even with higher oil prices. Moreover, global volatility will likely keep
64 RUSSIA Country Report August 2021 www.intellinews.com