Page 58 - RusRPTFeb19

5.2.2 Current account dynamics
The CBR’s estimate of the current account surplus for full year 2018 is a record $114.9bn, while for 4Q18 it is $38.8bn, which exceeded the $33bn surplus in 2017.
“The strength of the current account highlights that it is one of several parts of the Russian economy where sensitivity to oil prices is not reduced by the fiscal rule, but rather amplified,” VTB Capital (VTBC) said in a note. “In this case, it was because diminished ruble effective exchange rate (REER) sensitivity to oil eliminated imports’ sensitivity to improvements in the terms of trade. As a result, goods imports in 4Q18 were $65.6bn, but down –$1.9bn y/y. Were oil prices to average approximately $70/bbl in 2019, we would expect a current account surplus of close to $110bn.”
The CBR has reported the current account surplus for 4Q18 at $38.8bn, more than the total surplus accumulated in 2017 of $33.3bn and up +$25.3bn y/y.
At the components level, the trade balance has seen the most drastic improvement, of +$22.0bn y/y. Increased export revenues from oil and petroleum products contributed +$14.4bn to that, while other types of non-oil & gas exports were up just +$2.6bn.
Imports declined, in annual terms, for the second quarter. The pace of the decline almost doubled, from –$1.1bn in 3Q18 to –$1.9bn in 4Q18. The decline in imports signals modest domestic demand strength.
“To cross-check demand weakness in goods, we refer to the data on trade in services. The balance of this segment of trade continued to improve, in annual terms, for the third quarter in a row, meaning that the growth in exports exceeded that of imports. In particular, the transportation balance was up +$0.6bn y/y, mostly on the growth in exports,” VTBC said.
Both banks and corporates have seen their external debt contract, by –$8.1bn and –$2.3bn, respectively. For the banking sector, this is the 19th consecutive quarter that external debt has contracted, which started in 3Q14.
For the corporate sector, the decline in external debt only restarted in 2H18, and in this sense it is a reversal of the trend of 2017. In 4Q17, the corporate sector attracted around $2bn on a net basis.
58 RUSSIA Country Report February 2019 www.intellinews.com