Page 44 - RUSRptApr17

Imports of goods expanded 24.9% y/y. They totalled $47.6bn vs. VTBC estimate of $53.5bn. Historically the share of investment and intermediate goods in the value of imports has been 62% and the lagging recovery of imports is another consequence of households’ cautious consumption patterns and the back-loaded recovery of corporate investment activity.
5.1.1 Current account dynamics
Russian Economy Minister Maxim Oreshkin said that by the summer on April 18, the current account will run a deficit due to rapid import growth (25% y/y in 1Q17) and the seasonal deterioration of other components.
Russia ’ s balance of payments statistics for the first quarter of 2017 exceeding analysts ’ expectations w ith the surplus jumping to $22.8bn, according to the CBR data release on April 11, well ahead of the Bloomberg-compiled consensus of $18.8bn
“ In a positive sign, there was significant export growth in both the oil and non-oil segments, non-oil exports increased by 17.8% y/y (or $5bn) versus a 9.4% y/y decrease in 2016, ” Alfa Bank ’ s Natalia Orlova said in a note. “ However, on a negative note, import growth accelerated from 5.6% y/y in the third quarter of 2016 and 8.5% y/y in the fourth quarter of 2016 to 24.9% y/y in the first quarter of 2017, which poses a threat to further current account strength. ”
The capital account was negative : the net capital outflows accelerated to $15.4bn in the first quarter of 2017 compared to $16.1bn in 2016.
“ This is surprising given the foreign capital inflows to the local market. Therefore, despite the better-than-expected current account figures, we believe the ruble rate could return to its fundamental RUB60-65/$range later this year, as the current strength is not a sustainable trend, ” said Orlova.
According to CBR preliminary estimates, the current account surplus in 2017 decreased from $8.6bn in January to $5.5bn in February , while net capital outflow accelerated from $2.2bn to $2.9bn.
On the one hand, the dynamic of key BoP indicators for February was the reason for the ruble strengthening by almost RUB/$2 in February, while, on the other hand, it confirms the risk of lower fundamental support for the Russian currency after 1Q17.
The balance of trade and financial flows of the non-public sector declined from $6.4bn in January, but remained positive at $2.6bn in February – therefore the strong ruble is unsurprising even amid the MinFin’s purchase of $1.6bn in foreign currency last month. Furthermore, a surplus of foreign currency allowed banks to continue to repay their FX liabilities to the CBR, which dropped by $0.7bn from $6.3bn to $5.6bn.
44 RUSSIA Country Report April 2017 www.intellinews.com