The current account strengthens in April causing an unpleasant appreciation of the ruble

RUSSIA ECONOMICS - In Brief 16 May 2022 by Alexander Kudrin

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As the EU having imposed bans on exports to Russia, appears either quite slow or reluctant to get rid of energy imports from Russia, the latter's current account surplus widened in 4M22 to an unprecedented $95.8bn. In 1Q22, the current account surplus stood at $58.2 bn, implying that in April alone, it reached $37.6bn. Russia's balance of goods and service trade reached $106.5bn in 4M22 and $40.2bn in April alone. Given that traditionally Russia's service balance is negative, the trade surplus was even wider. Primary income balance was moderately negative (-$10.7bn in 4M22 and -$2.6bn in April). Hence an appreciation of the ruble to the R/$60-65 range, which is a too strong level which may soon start hurting domestic producers even of some basic products. Such a level was seen in 2018-2019, meaning that amid Russia's accelerated inflation the real ruble strengthened. Strict capital controls, imposed by the CBR after Russia launched its military activity in Ukraine was another reason for such an appreciation of the currency. If energy exports from Russia won't be restricted any time soon, then in order to avoid a further appreciation of the currency it would be reasonable for the CBR to soften capital controls – the sooner the better as this level of the ruble is far from its equilibrium level. It would be more reasonable to let it weaken gradually by allowing money to leave the country more freely rather than to see another one-off correction of the exchange rate at some point in the future.Evgeny GavrilenkovAlexander Kudrin