Russia’s current account showed a large surplus during the first half of 2019 approaching $50 billion due to increased foreign direct investment and a trade surplus.
The surplus, according to preliminary estimates, was mainly the result of a large trade surplus ($86.5bn). The other data shows a significant increase in FDI ($11.6bn in 1H19, up by x1.4 y/y) and a reversal of capital flows to an inflow of $7.9bn in June vs an outflow of $35.2bn in 5M19, reported bne IntelliNews.
Softer crude oil prices offset by weak domestic demand and lower imports all contributed to the surplus. In 1H19, the Urals crude price fell 4.5% y/y, which led to a 3.4% y/y fall in the trade balance and a 4% y/y decline in the current account surplus. However, lower oil prices were offset by weak domestic demand – the latter drove volumes of imports down by 3% y/y.
“Overall, CBR data shows that Russia’s external accounts remain in a solid state,” BSC Global Markets chief economist Vladimir Tikhomirov said in a note. “Russia’s external accounts remain solid, albeit in part a function of weaker demand. The continued current account surplus underscores two key positives – a fiscal surplus and a strong external position.”
The Kremlin and the Bank of Russia have been know for sound financial management over the last decade as Putin pushes gold reserves and rainy day funds. The rebound in crude oil prices on international markets has bolstered Russia’s foreign currency reserves and ruble-based coffers.
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