Page 46 - RusRPTNov18

Russian GDP and import volumes, realised and forecast (f) growth, %
2013
2014
2015
2016
2017
2018f
2019f
2020f
GDP
1.8
0.7
-2.5
-0.2
1.5
1.8
1.6
1.5
Imports
3.5
-7.3
-25.1
-3.6
17.5
6
5
5
Sources: Rosstat, BOFIT.
5.2.2 Current account dynamics
The CBR reported that the current account surplus reached $75.8bn in 9m18, up from $19.7bn in 9m17 and a $49.4bn in the first half of 2018, implying a surplus of $26bn in the third quarter of 2018.
The trade surplus reached $136.3bn in 9m18, while capital outflow from the private sector came in at $31.9bn, with $19.2bn of outflows registered in the third quarter of 2018. The combined outflow from the private and public sectors reached $40.2bn over 9m18.
The CBR’s balance of payments report for 3Q18 is remarkable in two ways.
First, financial flows showed the largest single quarterly decline in the external liabilities of the non-financial sector since 4Q14. However, the structure of the decline is different this time, as most of it is a reduction in debt related to FDIs vs. loans in 2014.
Second, the report sets the FY18 current account surplus on course to break 2008’s record of $104bn . VTB’s updated estimate of the current account surplus for 2018F stands at $113bn, exceeding the CBR’s projection of $98-99bn published in the recent Monetary policy report by around $15bn.
Non-financial sector’s external liabilities decline $10.8bn, the most since the $11.9bn in 4Q14. The composition of the deleveraging is different: the current report shows that the bulk of the decline was in the direct investment category ($6bn), with lesser deleveraging in loans ($3.2bn), while back in 4Q14 the mass of the capital outflow was in loans ($9.3bn) with portfolio investment a remote second ($1.5bn).
From a purely methodological perspective, the FDI flow is normally related to entities linked by a holding of at least 10% of ordinary share or equivalent. While the precise nature of the flow cannot be identified from the data supplied by the CBR, we believe that FDI flows tend to be non-recurring, i.e. unlikely spill over into 4Q18.
Goods exports improve, preparing the current account surplus to reach a historical peak . Goods exports were up 29.6% y/y to $109.6bn: there was a more sizable improvement in oil and gas exports, which were up 46.8% y/y to $66.2bn on the recovery in both export volumes and global prices. Non-oil & gas exports increased 10% y/y, bringing in $43.4bn. The imports of goods were flat at -1.3% y/y and remain almost unchanged vs. 2Q18 at $63bn, marking the end of the post-2015 volume recovery. VTB believes that import volumes will stabilise at close to $60bn per quarter.
Accumulation of international reserves halts. Considering that open market purchases were put on pause in early August, it comes as no surprise that the
46 RUSSIA Country Report November 2018 www.intellinews.com