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Trade surplus – shrank to USD 13.2bn in October

According to the CBR, the trade surplus in October dropped sharply to USD 13.2bn, from USD 15.7bn in September, the lowest level since August 2012. The annual growth in exports and imports plunged into the red, showing declines of 5.6% and 4.3%, accordingly. MoM SA growth was also less than thrilling: exports printed a 5.5% decline, while imports contracted 4.0%.

As we expected, October demonstrated unsustainability of the upwards move shown by the external trade surplus in August-September, although the scale of the decline in the headline number seems to be excessive. In exports, details show that the core drag was a sudden and sharp contraction in petroleum products (-18% YoY vs. a 6.5% YoY increase over 9mo13 on average) as well as crude oil (-4.4% YoY vs. +2.4% YoY in September). Meanwhile, gas exports, while slowing, added a heavy 15% YoY supporting the trade surplus.

According to the Ministry of Energy, November has not brought any tangible relief for energy exports: as the gas sector forged ahead in October. This was not enough to break the negative trend in oil-related exports, though. Meanwhile, the pace of decline in imports likely moderated last month (according to preliminary non-CIS imports data). On balance, in November we might see pretty much the same picture (or slightly worse) as in the reported period.

For 2014, we expect the trade balance to follow a narrowing path as our base case implies oil declining from current levels towards USD 100/bbl. However, this pressure on exports is likely to be limited on the back of hurdles for imports amid worsening labour market conditions, decelerating retail lending and slower growth in wages (especially in the public sector).

Vladimir Kolychev, Daria Isakova
VTB Capital analyst

CBR, Russia

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