BoP-2014 estimate shows reaction to FX shock

RUSSIA ENERGY / FINANCE - In Brief 19 Jan 2015 by Marcel Salikhov

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CBR published its preliminary BoP estimate for 2014 and 4q2014. It is first piece of data that shows reaction of the economy to record decline in oil prices and FX shock for complete year. Current account was in surplus both for 2014 and 4q2014 (at +$56.6 bln and +$10.5 bln respectively). So Russian economy continues to get net FX inflows on current operations even with low oil prices. In 4q2014 exports were -19.7% y-o-y while imports were down 20.8% y-o-y. Trade balance was +$37.5 bln (-17.4% y-o-y). Services account declined 18.3% y-o-y based on falling outbound tourism expenditures (16.8% y-o-y) and transport services (-12.2% y-o-y). Net labor payments were -$1.8 bln in 4q2014 compared to -$3.9 bln in 4q2013. The obvious cause of significant changes was plunging RUB. RUB value against USD was down -30.7% y-o-y on 4q2014 based an average quarterly data compared to -40.6% for average December figures. Contraction of imports of goods and services will intensify in coming quarters. We expect that import of goods will fall 25-35% even with RUB appreciation from current levels (65 RUB/USD). Graph 1. Current account and its major components, 1q2008 – 2q2014 Net capital outflow was -$151.5 bln in 2014 compared to -61.0 bln year earlier. While most commentators noted that capital outflow in 2014 was larger than in 2008 (-$133.6 bln) we note that yearly figures are not strictly comparable. Net capital outflow for 4 quarters starting 3q2008 were almost $190 bln. So new record of capital outflow were not yet achieved. But one should assume that CBR followed the policy of ‘smooth devaluation’ in 2008. Another observation is that compared to the crisis of 2008-2009 current capita...