Pressure on Russian balance of payments eases as capital outflow slows

Pressure on Russian balance of payments eases as capital outflow slows
Russia’s current account surplus shrank by over 60% in the first quarter.
By Henry Kirby in London April 18, 2016

An 80% decrease in capital outflows during the first quarter has eased the pressure on Russia’s balance of payments (BOP), data released last week by the Central Bank of Russia (CBR) has shown.

The $7bn of capital leaving Russia in the first quarter marked a fivefold decrease from the $32.9bn outflow recorded in the same period of 2015, softening the blow of a sharply weaker current account surplus resulting from low oil prices.

For net exporting Russia, a healthy current account surplus should be a given, yet for much of the last two years the balance has been hit hard by the reduced price of oil, its main export, and by international sanctions. Russia’s current account surplus shrunk by over 60% in the first quarter of 2016, compared with the same period a year earlier.

Combined with the vast capital outflows of 2014 and 2015, and the implications for Russia’s balance of payments were grim. Indeed, subtracting the total quarterly capital outflows from the country’s current account surplus produced a negative figure in every quarter from the beginning of 2013, ending only in the third quarter of 2015, as the bneChart shows.

While the current account and capital outflow figures are not intrinsically linked, they both play a key role in the Russia’s overall balance of payments. Even at the reduced levels of the past two years, Russia’s current account surplus was enviable by international standards, yet the negative effects of capital outflow exceeded the positive impact of the current account surplus for much of the last three years.

The sanctions imposed on Russia following the annexation of Crimea cut most Russian corporates off from the international capital markets. As a result, they were unable to refinance much of their debt obligations, instead having to pay down the debt rather than roll it over. This resulted in capital outflows that peaked at a massive $76bn in the fourth quarter of 2014.

Since then, capital outflow has fallen as principals were repaid and other sources of financing were found. Central bank data indicate $25bn of scheduled debt repayments for the first quarter of 2016, yet outflow was only a net $7bn, suggesting that Russia is indeed managing to refinance its liabilities.

The steadying of the ruble after 12 months of freefall following the CBR’s abandonment of its exchange corridor will also have led to a slowdown in the levels of foreign currency purchases that contributed so heavily to the capital flight of the last two years.

Data

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss