Current account surplus fell to almost zero in December
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According to the Bank of Russia’s first assessment of the results for 2023, the current account surplus of the balance of payments fell to almost zero in December. This is due to seasonality and the peculiarities of reflecting the payment of dividends to non-residents in the terms of special accounts, analysts say. Against this background, the level of foreign trade returned to the numerical indicators of 2019 and reoriented mainly to China.
According to the Central Bank, the current account surplus of Russia’s balance of payments almost went to zero in December, falling to $0.6 billion in December from $4.7 billion in November 2023. The zeroing is associated with the expansion of the deficit in the balance of primary income to $4.9 billion. This balance sheet item reflects the costs of servicing external debt, dividends and wages of non-residents. “Accounting for such payments has its own peculiarities: dividends are reflected at the time of their announcement, and not payment, that is, before physical flows. This leads to two distortions: an understatement of the current account surplus in the announcement month and an “optical” capital inflow, which is associated with the fact that before dividends are transferred abroad, dividends are considered reinvested,” explains Alexander Isakov from Bloomberg Economics. According to his calculations, excluding distortions, the current account surplus would be about $4 billion – and would be almost unchanged compared to November. Analysts on the Telegram channel “Hard Figures” associate this phenomenon with seasonality and calculate in a similar way: dividends are announced in December, and adjusted for the seasonal factor, the current account surplus amounted to $3.5 billion against an average of $4.2 billion for the 12 months of 2023.
The goods trade surplus in December was $8.7 billion, the same as in November 2023, which determines the size of the current account surplus. But foreign trade data may be subject to significant revisions. In December, after updating the actual data of the Federal Customs Service, the Bank of Russia increased its estimates of both exports and imports of goods in October-November 2023. Current estimates put merchandise exports at $422.7 billion in 2023, down 28.6% from a year ago, 14% below 2021, but close to the 2012-2021 average. Imports of goods amounted to $304.4 billion, which is 10.1% more than a year ago and corresponds to the levels of 2021.
However, both exports and imports are rapidly shrinking (see chart). Summing up preliminary results for 2023 in “Monitoring the Economic Situation in Russia,” Alexander Knobel, head of the international trade laboratory at the Gaidar Institute, and Alexander Firanchuk, senior researcher at the Center for International Trade Research at RANEPA, estimated exports for 2023 at $420 billion, noting “a return to the pre-Covid 2019 level.” of the year”. Imports, starting from the first quarter of 2023, have been decreasing from peak values, including due to the weakening of the ruble exchange rate, and have returned to the basic levels of 2019. “Russia’s key trading partner is China, whose share in trade turnover is estimated at the end of ten months of this year at 32%: 41% in imports, 26% in exports. Russia’s share in China’s trade turnover (5.1% in imports, 3.3% in exports) is significantly inferior to the main unfriendly countries, which retains the risk of a decrease in trade in the event of secondary sanctions,” they wrote.
The current account surplus will normalize in the first quarter of 2024, and the main external story for the first half of the year should be the attenuation of imports as lending cools, according to Bloomberg Economics. As a result, imports of goods will decrease in 2024 to $285–290 billion from $304 billion in 2023, although the consensus forecast of the Bank of Russia at the end of 2023 expected import growth in 2024.
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