Oil yuan for export – Newspaper Kommersant No. 8 (7453) dated 18.01.2023

The surpluses of the current account of the balance of payments and the account of foreign trade in goods and services in 2022 turned out to be record-breaking – 1.8 and 1.6 times more than a year ago, the Bank of Russia estimated. However, by the end of the year, the surpluses almost zeroed due to Western sanctions and the restoration of imports. In 2023, an increase in sanctions pressure may already lead to a noticeable decrease in surpluses, a weakening of the exchange rate and higher inflation.

In 2022, the Bank of Russia recorded record surpluses in the current account of the balance of payments ($227 billion against $233.6 billion according to the January consensus forecast of FocusEconomics and $253 billion according to the Central Bank’s forecast) and the account for trade in goods and services ($282 billion against $305 billion according to the Central Bank’s forecast). According to the regulator, the value of exports increased by 14% over the year, while imports decreased by 9%, which was the main reason for the records, achieved mainly in the first half of 2022.

In the fourth quarter of 2022, the current account surplus decreased for the first time since the first quarter of 2021 by 33% in annual terms. The reasons are the decline in the price of Urals oil (to $63 per barrel from $78 a year ago) and gas exports (by $20 billion yoy), as well as a strong recovery in imports, which was stimulated by growth in budget spending and a soft credit policy, notes Alexander Isakov from Bloomberg Economics. . The contraction in exports is the result of EU and G7 restrictions on the import of Russian goods, and the rapid collapse of the foreign trade balance is the main reason for the sharp depreciation of the ruble in late November-December 2022.

A comparison of annual data with an estimate of the balance of payments for January-November 2022 shows that in December the current account surplus fell to $1.7 billion against $10.3 billion in November and $19.7 billion in October, analysts from the MMI Telegram channel estimated . Against this background, the deficit of primary and secondary income in December amounted to $10.6 billion, which is 2.7 times more than the amount in October-November 2022, analysts of the Solid Numbers Telegram channel add, adding that revisions of estimates within quarters will are still not published – the distribution by months could be different. However, the growth in the deficit of primary and secondary income, as the Central Bank notes, “is associated with the dynamics of personal transfers, including wages: their receipt from non-residents has decreased, while their direction abroad has increased.”

“Imports are usually low at the beginning of the year, so the current account surplus now appears to be higher than in December, even despite rock-bottom oil prices. A further reduction may occur in the second quarter, when imports usually begin to grow, and by that time exports will be further hit by sanctions on petroleum products. However, the working budget rule will smooth out the pressure on the ruble until the yuan runs out,” the authors of the MMI Telegram channel note. According to the IEA, on average, in 2022, Russia exported about 1.2 million barrels of oil products per day, the closure of the European market will reduce these volumes by the end of the first quarter of 2023 by five times, BCS analyst Ronald Smith estimated. Mr. Isakov notes that the sale of foreign currency under the budget rule helps to compensate for the shortfall in export earnings only in part: with the price of oil unchanged, the Ministry of Finance will sell yuan in the equivalent of $30 billion, and export earnings will decrease by $260 billion, to the levels of 2016-2017. “But now monetary policy is softer, ruble rates are lower, and the budget is based on more optimistic expectations for the price of oil. This means that maintaining the current discount on Urals could reduce the current account surplus to $50-70 billion this year, weaken the exchange rate by 10-15% by the end of 2023 and create a risk that inflation by the end of the year will be around 7%,” he concludes.

Artem Chugunov