Current account surplus widens in May and is set to remain strong in June

RUSSIA ECONOMICS - In Brief 11 Jun 2020 by Alexander Kudrin

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CBR reported that Russia’s current account and trade surpluses widened in 5m20 relative to 4m20 and reached $28.9bn and $43.2bn (from $23.5bn and $35.6bn as CBR estimated earlier these two surpluses for 4m20). This means that in May the trade surplus unsurprisingly widened in May to $7.6bn as the Urals price of oil exceeded $30/bbl ($22.5/bbl in April on average), while imports could have shrunk in May more than in April (CBR have not yet provided estimates of exports and imports – just trade balance). As a result, both surpluses increased last month by more than a factor of two compared to April numbers.As it follows from these estimates combined balance on the side of services, pay and income (primary and secondary) transactions, which is traditionally negative in Russia widened both in May and in 5m20 to around -$2.2bn and -$14.3bn. Normally this widening is seasonal as by mid-year interest payments go up followed by dividend payments in the following months. Services balance also becomes more negative due to summer holidays, but this summer foreign tourism will be most likely locked.As the price of oil moved to above $40/bbl in early June, Russia’s trade surplus will further widen this month, which together with continuous FX interventions by Minfin (the latter is set to account for around $3bn this month) will largely offset an expected increase in negative income balance. Unless the price of oil moves far away from its current level in the next few weeks, the ruble exchange rate is unlikely to change significantly.Evgeny GavrilenkovAlexander Kudrin