Estimated current account surplus hits record in January

RUSSIA ECONOMICS - In Brief 09 Feb 2022 by Alexander Kudrin
The Russian Central bank published its flash estimate of the main elements of the country’s balance of payments. The current account surplus reached $19bn, while the trade balance widened to $21.4bn. It was greater by more than a factor of two compared to the same numbers reported in January 2021 ($8.1 bn and $9.0 bn). Meanwhile, last week Minfin reported that the Urals price of oil averaged at $85.64/bbl in January and well exceeded January 2021 number ($54.41/bbl).Exports of goods in January grew much faster than imports, while other elements of the current account, such as the usually negative services and income balances, could only slightly offset the widened trade balance. Hence the current account surplus hit the historical record. Just for reference – in 4Q21 the current account surplus widened to $41.8 bn and in 2021 it reached $120.3 bn.Given that in the previous months the ruble weakened amid a combination of geopolitical tensions and rising oil price (having shortly exceeded R/$ 80 level) and currently remains at around R/$ 75, with very limited chances to appreciate more, Russia’s imports will remain curtailed. Therefore, the current account surplus may hit the historical annual level in 2022, which will be challenging for the CBR as Minfin’s activity on the local money markets, such as FX purchases stipulated by the fiscal rule, will increase massively. The federal budget revenues will keep soaring prompting the government to amend spending in order to limit the surplus and liquidity absorption. Inflation may remain elevated as a result.Evgeny GavrilenkovAlexander Kudrin

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