Current account and trade balance widen in August, albeit more slowly

RUSSIA ECONOMICS - In Brief 09 Sep 2022 by Alexander Kudrin

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The CBR reported that the current account and the trade balance (including goods and services) widened to $183.1 bn and $213.6 bn in 8M22. In1H22 these figures were at $144.9 bn and 167.1 bn accordingly implying that in July and August combined the current account reached $38.2 bn and the goods and services balance was at $46.5 bn implying that on average, in the previous couple of months these monthly balances narrowed compared to monthly their average levels seen in 1H22. Still, Russia's external balances are historically strong, and the ruble is dangerously strong. Hence, Russia's reluctance to resume gas exports to Europe via the Nord Stream, as the country doesn't need that much exports in the new reality as it cannot hoard "unfriendly" cash and save its surpluses in the National Wealth Fund. As some European leaders see traveling to the EU as a privilege for the Russian people, and therefore, formally suspended the current visa arrangements with Russia from September 12, Russian policymakers may respond in a similar fashion, i.e., by saying that buying the Russian pipeline gas is also a privilege. The same is likely to happen with oil after an exotic idea to impose a price cap on Russian oil will be introduced. A transformation of the Russian economy is likely to be long-lasting as it will need to reduce capex in the energy sector and suppress its share in GDP to allow the rest of the economy to grow. Evgeny Gavrilenkov Alexander Kudrin