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Macro Analysis / Russia

Russia: Low import of services main support factor for current account surplus

  • Low import of services, still down 52%, was the main support factor behind current account surplus of $2.5bn in 3Q20
  • The flipside of this is that a fast return to full-scale international mobility looks unlikely
  • Keeping restrictions in place will prevent additional ruble weakness if geopolitical risk-premium for the ruble persists

The low import of services, still down 52%, or by $15 bn in y/y terms, was the main support factor behind Russia’s current account surplus of $2.5 bn in 3Q20. The flipside of this is that a fast return to full-scale international mobility looks unlikely: keeping restrictions in place will prevent additional ruble weakness if the geopolitical risk-premium for the ruble persists and, at the same time, will provide authorities with an option to act in case market sentiment reverses and the threat of a stronger ruble reappears on the agenda.

Russia’s current account surplus reached $2.5 bn in 3Q20, $24.1 bn for 9M20: The CBR reported Russia’s 3Q20 current account surplus at $2.5 bn, which came above our expectations. Despite this representing an $8 bn contraction from the 3Q19 current account surplus ($10.7 bn), the fact of running a surplus should be considered positive. For 9M20, the current account surplus of $24.1 bn came in line with our forecast as the CBR revised down the 2Q20 result from +$0.6 bn to -$0.5 bn.

Non-fuel exports above expectations and unchanged from the 3Q19 level: The 3Q20 statistics reflect that the trade performance remains strong. We were positively surprised by non-fuel exports, which came in at $46.2 bn in 3Q20, unchanged from 3Q19; for 9M20, non-fuel exports were just $124 bn or 53% of Russia’s total exports. The fuel export revenues were not only under pressure from lower prices but also experienced a contraction in volumes due to obligations to the OPEC+ deal.

Imports of goods contracted by 8% y/y in 3Q20 versus the 4% y/y we had expected: Additional support to the trade balance came from the deeper-than-expected contraction in imports – instead of the 4% y/y contraction, which we had expected for 3Q20, imports declined by 8% y/y or by $5.5 bn in y/y terms. We consider this figure to be the result of two different trends. From one side, it could be partially due to the break in the global value chain – from this perspective it matches the 0.5% y/y decline in car sale reported in August. From another, however, lower imports could reflect a slower recovery in manufacturing growth and, thus, modest demand for intermediate imports: for 8M20, manufacturing output was down 2.5% y/y. All in all, with growing risks of a second wave of Covid-19, imports dynamics should not be an area of concern.

Import of services down 52% y/y in 3Q20, bringing $15 bn support to the current account: The main factor contributing to the strength of the current account was the decline in the import of services. While in 2Q20 this indicator came $13 bn below the level of the same period last year, in 3Q20 its contraction reached $15 bn in y/y terms, or a 52% y/y decline. Thanks to this, the Russian balance of services for 9M20 was reported with a deficit of $12 bn versus a $27 bn deficit in 9M19.

Russia’s net capital outflow reached $35.6 bn in 3Q20 only 70% covered by the current account surplus: Despite the relatively strong current account figure, its surplus was clearly not enough to cover net capital outflows. In 3Q20, net capital outflows from the private sector reached $7.9 bn which was not substantially below the level of $10.5 bn reported for 2Q20. For 9M20, it was reported at $35.6 bn and the current account surplus covered only 70% of this amount. The rest was covered by the decline in reserves, which the CBR reported being down by $10.1 bn for 9M20.

Return to international mobility seems to be linked to the ruble performance: There are couple of takeaways from the 9M20 results. Firstly, the firm 3Q20 current account confirms that the ruble exchange rate was under geopolitical pressure and trade fundamentals do not provide a reason for the sharp currency depreciation. Secondly, however, while the 3Q20 current account breakeven of around $40/bbl is a good result, an important factor behind this is the substantial contraction in the import of services. Should it recover to pre-Covid levels, the current account breakeven would move to a level of $50/bbl, potentially placing additional pressure on the ruble. The implicit conclusion is that Russia will not be in a rush to open its borders: keeping restrictions in place will prevent additional ruble weakness if the geopolitical risk premium for ruble persists and, at the same time, will provide authorities with an option to act in case market sentiment reverses and the risk of a stronger ruble reappears on the agenda.


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The contents of this document have been prepared by Joint Stock Company “Alfa-Bank” ("Alfa Bank") as Investment Research within the meaning of Article 36 of Commission Delegated Regulation (EU) 2017/5...

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