Monthly current account surplus continues to narrow

RUSSIA ECONOMICS - In Brief 09 Aug 2023 by Evgeny Gavrilenkov

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The CBR published an estimate of some parameters of the 7M23 balance of payments. The current account surplus accounted for $1.8bn and $25.2bn in July and 7M23, implying that its monthly value continued to narrow. In 1Q23 and 2Q23, the current surplus accounted for $14.8 bn and $8.6 bn. The trade balance surplus also shrank from $30.2 bn in 1Q23 to $26.8 bn in 2Q23 and $7.3 bn in July. Even though these numbers are preliminary and may be updated later, the balance of payments statistics clearly explains the weakening of the ruble. In the previous days, the ruble-to-dollar exchange rate surpassed $/RUB 95 and continues weakening further. Apart from lower energy prices, suppressed volumes of Russia's exports, and growing imports, some additional pressure on the current account and the currency came from a widening negative services balance. As Russians gradually resume foreign traveling (largely avoiding "unfriendly" countries), demand for FX keeps rising. In July alone, the services balance deficit reached $4.0 bn, while in 1Q23 and 2Q23, it stayed at $7.8 bn and $8.8 bn. In 4Q23, this additional pressure from travelers will gradually decrease. At the same time, a weaker ruble will prevent a further rise of imports, while exports may slightly increase as recent data show that the spread between Brent and Urals narrowed. Urals average price was well above the $60/bbl limit imposed by the "unfriendly" regulators. That said, one can expect that for the rest of the year, the monthly current account surplus can somehow widen compared to its July value