Page 20 - bne magazine November 2021_20211104 uzbekistan risding

20 I Companies & Markets bne November 2021
risk mode) keeps the ruble undervalued, making it continuously favourable for trade balance. A mirrored shrinking of the current account surplus and net capital outflow under more or less stable exchange rate would be a sign of a reversal in the trend.
Near-term ruble outlook improved, but ruble's stabilisation at the lower bound of the USDRUB70-75 range is an optimistic case
An exceptionally strong 3Q21 current account prompts
us to improve our full-year outlook by around $30bn to $125bn in 2021. Thanks to that, we now see a possibility of ruble appreciating to 70-71 in the coming 4 weeks and see potential room for improvement of our year-end target of 73.0. Taking into account partial sterilization of the current account via FX purchases, ruble fair value should be improved by USDRUB2.0, all else being equal. Nevertheles, ruble's
stabilisation at the lower bound of the USDRUB70-75 range
in the medium-term remains an optimistic scenario, requiring moderation in the private capital outflow and stabilisation
of $ to major currencies, none of which is part of our base case at the moment.
Dmitri Dolgin is the chief economist for Russia at ING. This note first appeared on ING’s THINK.ING portal.
Content Disclaimer: This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The informa- tion does not constitute investment recommendation, and nor
is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument.
Non-oil exports driving Russia towards new
all-time high current account balance this year
bne IntelliNews
Non-oil exports drove Russia’s current account balance to a historical quarterly high of $40.8bn in the third quarter, the CBR reported on October 11.
“The increase was primarily due to the improvement in the trade in goods and goes beyond oil & gas exports: non-O&G goods exports advanced to $73bn, up +$25bn year on year,” Alexander Isakov, chief economist at VTB Capital (VTBC), said in a note. “The upturn in non-O&G exports was mostly due to metals, aluminium and steel, in particular, screening both by the rise in metal prices and growing export volumes (the latter according to the monthly data).”
The turnaround in Russia’s trade regime has been dramatic. At the start of 2020 analysts were speculating that the current account would go into the red for the first time in almost two decades and indeed, it briefly dipped below the line for one month.
But now exports are booming and Russia has continued to reduce its dependence on oil and gas exports, although both those categories are doing very well at the moment on the back of sky-high prices for gas and $80-plus prices for oil. Oil and gas earned $61.9bn in exports in the third quarter of this year but that was slightly less than the $72.9bn earned by everything else.
“The $40.8bn current account surplus increased net foreign assets by $26bn (of mostly corporates in the form of direct investment and trade credits) and foreign reserves by $12.9bn (the rest is errors and omissions),” Isakov said. “Another $16.7bn of the increase in foreign reserves came
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through the [IMF’s] SDR allocation, which enlarged the CBR's foreign liabilities accordingly.”
The rapidly improving state of Russia’s trade regime has already had a visible knock-on effect on the ruble, which has strengthened considerably and is one of the world’s best performing currencies this year.
“We believe the report shows that we can expect a notable revision of the balance of payments CBR's July projections: from $88bn, it could shift up to $110bn-$120bn. We expect the current account strength to carry over into 4Q21 (supported by both commodities prices and growing export volumes), which we see as a positive development for the RUB,” said Isakov. “Our forecast for the full-year surplus is $115bn-$120bn, which, if our estimates are correct, would exceed the 2018 historical high (and adds to the similarities between 2021 and 2018).”
Russia balance of payments ($bn)
Source: CBR, VTBC