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Russia Current Account Surplus Jumps to Record Despite Sanctions

A pedestrian passes the headquarters of Bank Rossii, Russia's central bank, in Moscow, Russia, on Friday, Feb. 7, 2020. The Bank of Russia delivered a sixth consecutive bout of monetary easing as inflation continued a retreat below target.

Russia’s current account surplus more than tripled in the first four months of the year to $95.8 billion, the central bank said, as prices surged for its oil and gas exports and imports plunged under the weight of sanctions imposed by the US and its allies over President Vladimir Putin’s invasion of Ukraine.

The surplus on the current account, the broadest measure of trade in goods and services, was the highest since at least 1994. The figure in first four months of last year was $27.5 billion.

The steady inflow of revenue from energy and other exports has — together with strict capital controls — helped support the ruble, turning the Russian currency into the best performer in the world this year.

“Against this background, the central bank will likely ease controls on current operations, which will alleviate the pressure on the ruble,” said Anton Tabakh, chief economist at Moscow-based credit assessor Expert RA.

The central bank said on May 11 that the ruble’s recovery was the result mainly of the capital controls imposed to stabilize the currency after the invasion and the decline in demand for imports amid sanctions and the exodus of foreign firms from Russia.

What Bloomberg Economics Says:

“A collapse in imports will probably keep Russia’s current account in surplus, but it reflects a painful adjustment. Shortages of foreign consumer goods and critical components will continue to erode living standards, push up costs and weigh on output as sanctions ripple through supply chains.”

–Scott Johnson, Russia economist

The central bank didn’t break out a figure for April, but reported a surplus of $58.2 billion for the first quarter, suggesting the result last month could have reached as much as $37.6 billion.

“This current account surplus isn’t likely to last long amid harsh sanctions,” said Olga Belenkaya, economist at Finam. Planned European Union restrictions on coal and oil imports from Russia will hit exports, she said, while imports into Russia will likely recover as new suppliers and routes are found.

RUSSIA INSIGHT: EU’s Go-Slow Embargo Limits Damage for Putin

The EU is discussing moves to cut off imports of oil from Russia, but those would take time to come into effect. Reducing gas supplies would be even more difficult, given the heavy reliance of some countries on the continent on Russian fuel.

Even with oil restrictions, Russia’s capital account surplus may reach $264 billion this year, more than double the $122 billion reported in 2021, Capital Economics forecast on May 6.

 

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