As we wrote on Monday, the CBR’s data on external trade in July came lower than both the Bloomberg consensus (USD 13.5bn) and our forecast (USD 12.7bn). Along with stronger imports (partly due to a one-off spike in aircraft imports), July’s trade balance was dragged down by lower exports as it responded more significantly to the oil price performance with a one-month lag. To recap, Brent declined steadily in May-June towards USD 90/bbl, before picking up at the end of June. Thus, July’s recovery in oil prices will mainly be supportive for August exports, in our view.
We expect the August trade surplus to increase on slower imports (preliminary customs data for non-CIS showed a sharp drop in volatile components and weak investment goods import) and greater exports on higher oil and (likely improved) gas export volumes on the back of stronger gas production.
However over a broader time horizon, given our base case scenario with Urals near USD 100/bbl for the rest of this year, the trade balance is likely to worsen and mirror the downwards move in oil prices, especially on the back of seasonally stronger imports in November and December. Thus, under our base case scenario, we are comfortable with our forecast of the dual-currency basket reaching 37.50 at the end of December this year. Under a scenario of stronger oil (at current Brent prices near USD 115/bbl level) RUB is likely to perform stronger, with the dual-currency basket remaining within the 34.5-36.0 range most of the time and finishing the year closer to its upper end.