The ruble is waiting for the return of debts for exports
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Raiffeisenbank analysts examined the details of the Russian balance of payments for the second quarter of 2023, published by the Central Bank at the end of September, and the impact of external sector statistics, especially in terms of the financial account, on the ruble exchange rate. “The devaluation trend in 2023 is still determined by a narrowing of the balance of goods and services,” they concluded.
After the records of 2022, the trade balance in 2023 was below the 2017-2019 average of $35 billion – about $30 billion – and, taking into account seasonality, in the second quarter differed little from the first. “The weakening of the exchange rate could be strengthened by the growing share of ruble payments in terms of exports, without taking into account which the balance nevertheless decreased,” bank analysts believe (see chart). Foreign travel (referring to imports of services) reached pre-Covid levels (more than $9 billion in the second quarter), despite sanctions restrictions. “Although the size of the balance of services is many times smaller than the balance of goods, its impact on the ruble exchange rate can also be significant, especially in conditions of low liquidity of the foreign exchange market,” note Raiffeisenbank.
The structure of the financial account can explain the rate of weakening of the ruble, clarifying through which channels of the financial account capital outflow occurs, and the differences in exchange rate dynamics in the first and second quarters. As already noted, in the balance of payments the share of transactions that do not directly affect the ruble exchange rate has increased (see Kommersant on June 13) – for example, part of the transfer of money to type “C” accounts (in September, when the Russian Federation Eurobond was repaid in equivalent to about 300 billion rubles, the Central Bank estimated the amount of additional liquidity that may be required by the foreign exchange market at 150 billion rubles, that is, only half of the money transferred to the accounts at NSD had to “return” to it).
Analysts also note an increase in other debt from other sectors to $13.3 billion in the second quarter against $4.1 billion in the first, which may be caused by the accumulation of debts for export supplies. This “may explain the lag between the improvement in nominal exports (which has nevertheless been observed since August) and its support for the ruble (it will become more pronounced as this debt is repaid),” according to Raiffeisenbank, expecting the ruble to strengthen in the coming months to 85–95 rubles. /$.
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