Russia sees big drop in foreign currency inflows
Russia’s current account surplus slumped in the second quarter of this year from a 2022 peak, data released by the central bank on Tuesday has revealed.
The surplus, which reflects the difference between exports and incoming payments and imports with outgoing payments, decreased to $5.4 billion from April to June, compared to $76.7 billion in the same period last year.
Profit from foreign exchange dropped by 93% and almost threefold compared to the first quarter of the year, putting the ruble under pressure, preliminary figures show.
It’s the smallest surplus since the third quarter of 2020, when crude prices fell to their lowest since the 1990s amid the pandemic and Russian oil companies were forced to slash output.
The decline in the foreign trade surplus between January and June “was caused by a decrease in both the physical volumes of export deliveries and the deterioration in the price environment of main Russian export commodities, with energy products having contributed the most to the decline in the value of exports,” the regulator said in a statement.
Revenues from energy exports have been hit hard following unprecedented Western sanctions, which have banned seaborne exports to the EU and imposed price caps on Russian crude and petroleum products.
Lower crude prices, reduced gas flows to the EU, and a recovery in demand for imports are cutting into the country’s proceeds. According to Goldman Sachs’ estimates, decreased oil prices contributed $25 billion to the second-quarter drop in the surplus year-on-year.
“A weaker trade balance means Russia’s ruble will remain weak as well, on our estimates, lifting inflation close to 5% this year. We expect the current account surplus in 2023 to shrink to less than a fifth of last year’s $233 billion,” said Bloomberg’s Russia economist, Aleksandr Isakov.
He warned that the smaller external balance will hurt Russia’s ability to use capital to acquire the assets and infrastructure it needs to avoid sanctions.
The central bank still expects a current account surplus of $47 billion this year, and $38 billion in 2024.
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