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FY12 BoP final estimate

Late Friday, the CBR published its final estimate of BoP in 2012. The CA surplus was revised down slightly from USD 81.3bn to USD 74.8bn, mainly due to downwards revisions in the trade balance (from the first estimate of USD 195.4bn to USD 193.3bn), and the investment income balance (from -USD 53.4bn to -USD 55.5bn).
On the financial account front, the FDI balance returned to the black for the first time since 2008, with a USD 0.4bn surplus, mainly on the back of smaller outflows, as inflows were almost unchanged at USD 51.4bn (vs. USD 52.9bn in 2011). The portfolio investment balance also printed a surplus (the first time since 2007) of a heavy USD 13.7bn (vs. -USD 17.9bn in 2011) on improved inflows. Outflows in dubious operations added USD 5.8bn to USD 38.1bn last year. Net errors and omissions improved from USD 10.0bn in 2011 to USD 9.2bn in 2012.

The CBR’s revision of the FY12 BoP numbers was rather light and brought no surprises. Despite stable oil prices over the last two years, the current account surplus declined from 5.2% of GDP in 2011 to 3.7% in 2012.

The stalled FDI inflows can partly be attributed to a combination of weakness in the global economy and Russia’s poor business climate so far. We still suggest that it is time to deliver on the institutional level to increase the FDI stream. At the same time, favorably smaller FDI and portfolio investment outflows might be due to narrower CA surplus, as we think that the CA and financial account balances are moving in a tandem. On the outflows side, dubious operations together with net errors and omissions represent 63% of the CA surplus (vs. 43% in 2011). This again highlights the rising vulnerability of Russia’s BoP to swings in oil prices. We believe that the outflows problem in this part needs to be addressed by improving the business climate (especially, in customs and tax administration) and undertaking anticorruption and anti-money laundering activities.

Maxim Oreshkin, Daria Isakova
VTB Capital analyst

CBR, dollar, oil, GDP, Russia

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