Current account is strong in 1H21 implying Russia remains net creditor to the rest of the world

RUSSIA ECONOMICS - In Brief 09 Jul 2021 by Alexander Kudrin

---

The Central bank reported that Russia’s current account surplus reached $43.1 bn. It slightly narrowed in 2Q21 to $19.9bn compared to $23.2bn in 1Q21 despite higher exports. It largely happened as the deficit of the income balance widened. Increased imports also helped reduce the surplus, but in absolute terms, they grew less than exports. It looks as though in May and June, imports stopped growing in absolute terms. Comparing the detailed foreign trade statistics (data available for January –April) with the CBR’s preliminary estimate of the 1H21 balance of payments, one may conclude that imports in May and June stabilized at around monthly $25bn. This level is slightly below the volumes seen in March and April. Trade balance widened in 1H21 to $62.4 bn ($28.4 bn in 1Q21 and $34.0 bn in 2Q21). The services balance, which traditionally is strongly negative, remained at just $3.6 bn in the entire 1H21 as Russians didn’t travel abroad as much as it used to be. The investment income deficit widened from $1.4 bn in 1Q21 to $12.3 bn in 2Q21, bringing the 1H21 figure to $13.6 bn. Hence net repatriation of profit/income from Russia remained strong, which helped ease pressure on the ruble to appreciate.On the capital account, the situation looked in some sense similar – as capital fled the country. It happened mainly in the form of net acquisition of foreign assents by the non-financial sector - including individual investors who increased their global exposure (especially in 1Q21).The 1H21 balance of payments statistics illustrates that investors see limited opportunities to invest new money or reinvest in Russia. On the one hand, it limits Russia’s potential growth, but on th...