Page 64 - RusRPTNov21

On 11 October, CBR published its first estimate of Russia’s balance of payments for 3Q21. CA rose to $40bn in 3Q21, coming in above our and consensus expectations.
The improvement was due to higher commodity prices, which supported export revenue in the energy and non-energy sectors (especially in the precious metals segment).
Although this improvement was offset by private capital outflows and aggressive reserve accumulations, most outflows were in the form of purchases of FX assets by exporters, on our estimates. Going into 4Q21, higher gas prices alone could bring in an additional $15-45bn in export proceeds. Even with conservative assumptions, the CA balance could reach $128bn (c. 7.3% of GDP), its highest level since 2006. With such high buffers, we could see upside risks to our FY21 RUB/$ forecast of 70.1.
The goods balance rose to $56.8bn in 3Q21 vs. $18.8bn in 3Q20 and $38bn in 3Q19. Oil exports remained subdued vs. 3Q19 (-8%) due to OPEC+ supply curbs. Notably, gas exports and non-energy exports were up nearly 60% vs. 3Q19, and oil product exports added just 11%. Goods imports also reflected a significant pick-up in consumer and investment activity this year, rising 20% vs. 3Q19.
The services deficit widened to $4.6bn vs. $26bn in 3Q20 and $11.7bn in 3Q19. Both services exports and imports remained subdued (-19% and -36% vs. 3Q19, respectively). The investment income balance remained nearly the same vs. 2Q20 and was 25% lower than in 3Q21 following changes in the seasonality of dividend payments in 2020 and last year's lower profits.
Private capital outflows counterbalanced the stronger CA, reaching $34bn vs. $8.5bn in 3Q20 and the inflow of $2bn in 3Q19. The major driver of capital outflows was the accumulation of assets worth $22.4bn, while remaining flows were insignificant. Public sector flows were driven by the issuance of SDR rights worth $17.5bn from the IMF COVID-19 program. In addition, public assets (sovereign debt) saw a significant inflow of $6.6bn after the introduction of additional sanctions in 2Q21. One-quarter FX purchases under the fiscal rule reached an all-time high of $29.6bn in 3Q21 vs. $8.5bn in 2Q21 and $3.7bn in 1Q21.
64 RUSSIA Country Report November 2021 www.intellinews.com