The growth of net exports reduces the depth of the economic downturn

A preliminary estimate of the surplus of the current account of the balance of payments of the Russian Federation in January-September 2022 is $198.4 billion (2.6 times more than a year ago), the trade account is $238 billion (2.2 times more), the Central Bank said. This increase in net export earnings is the main reason for the improvement in medium-term forecasts for the depth of the economic downturn. The consensus forecast prepared by FocusEconomics analysts for September 27-October 2 fixes: 90 days ago, experts expected a balance of payments surplus in 2022 in the amount of 9.5% of GDP, now it is 10.6% of GDP.

Export revenues are growing due to a favorable price environment for the main exported goods and a decrease in the value of imports, the Central Bank explains. However, as Kommersant wrote, there were changes in this part within the third quarter: exports began to grow more slowly, and imports began to recover quickly (see Kommersant of September 16 and 19). These changes are also reflected by the dynamics of the ruble exchange rate (see “Today’s date“). The current account balance in the third quarter turned out to be one third lower than in the second quarter. “The trade surplus is shrinking rapidly but remains high so far (current account around $15bn in September). In the next six months, the key factor in foreign trade (and for the ruble) will be the effectiveness of the EU embargo on the export of oil (introduced from December 5) and petroleum products (from February 5),” the authors of the MMI Telegram channel conclude.

Against this background, the total deficit of primary and secondary incomes in the current account of the balance of payments also grew, including due to a decrease in investment income and transfers received, which also contributed to the reduction in the current account surplus. Residents reduced their liabilities to non-residents by $2.7 billion (by $53.3 billion in the second quarter). The growth of their foreign assets is estimated at $46.9 billion, which is 1.8 times more than in the second quarter (by $25.7 billion). “Net lending to the rest of the world was carried out both in the form of a reduction in external debt on financial instruments and an increase in the amount of other foreign assets,” the Central Bank notes. Yesterday, Deputy Chairman of the Bank of Russia Alexei Zabotkin said that the regulator will continue to remove restrictions on capital movements, noting that they can be used again when financial stability risks materialize.

Artem Chugunov