FY12 BoP data implies still strong trade on higher oil prices
According to the CBR's first estimate of the BoP for 2012, the current account posted a healthy 4.1% of GDP surplus, with the bulk of the worsening coming from the high growth in the import of services. The trade surplus was strong at USD 195bn, checking in with almost zero annual growth. Private capital outflow, on a net basis, declined one third to USD 57bn in 2012, partly due to a greater inflow of banks’ foreign liabilities (USD 40bn vs. USD 8bn in 2011) and the inflow of banks’ foreign assets dropping by half (USD 16bn). On the positive side, foreign asset growth slowed in corporate sectors as well, but was not that visible as in banks. For the first time, the CBR separated FX swaps operations (between the regulator and commercial banks) in BoP, flagging USD 8.8bn for last year.
The CBR's estimates reveal a still strong CA surplus, but the visible progress in services imports dragged it down despite slightly higher oil prices. Favorable seasonality and an expected decline in import growth due to a cooling economy underpin a better outlook for RUB in the coming months. However, once the breakeven oil price for CA returns to USD 100/bbl in 2Q13 and 2H13, any marked decline in oil prices would likely push the CA balance into the negative area and trigger RUB weakness. Global turmoil pushed the growth in foreign assets down. We treat this mostly as a one off as, leaving aside appealing rhetoric, there have not been done any remarkable improvements in Russia’s business climate so far. Besides, the economy is still operating close to its potential and simply cannot absorb more investments without a threat of bubbles. Adjusted for the CBR’s FX swaps, private capital outflow was USD 66bn (with half of it in 1Q12). We maintain that the strong outflow is to a large extent a function of CA surplus and as soon it gets lower, capital outflow will also decline. This was seen in the last nine months of 2012.
Maxim Oreshkin, Daria Isakova
VTB Capital analyst
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