Russia’s current account widens in January which creates a solid base for economic recovery

RUSSIA ECONOMICS - In Brief 09 Feb 2021 by Alexander Kudrin

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Russia’s current account and trade surplus widened in January relative to previous months. The current account surplus reached $6.8bn, while the trade surplus was at $9.4 bn. In 4Q20 as a whole, the current account surplus at $5.5bn, and the trade surplus was at $21.5 bn. Based on the CBR preliminary estimate of the balance of payments and the 11M20 monthly foreign trade statistics, the trade surplus in December reached $8.0 bn, having increased from $6.4 bn in October and $7.1 bn in November as the oil price went up. In January, the oil price increased more, and an upward trend continued in early February, which means that despite the appreciated ruble, the ruble equivalent of Urals increased. Hence oil-and-gas revenues of the federal budget will continue to climb. As a result, the government is likely to decide to increase its daily/monthly purchases of the FX, i.e., in line with the fiscal rule. In turn, the liquidity situation, which was tight in January, will stabilize. It already eased in early February not only due to Minfin’s FX purchases but also on the back of its ruble REPO operations with banks.Meanwhile, it looks as though imports in December grew y-o-y by around 3.6%. Imports will likely remain at least flat y-o-y in 1Q21 despite a relatively high pre-pandemic base (and most likely above the 1Q20 level). It will also imply that tax collection (VAT and excise on imported goods) will be high. Retail sales, eroded in real terms by accelerated inflation in December (and most likely in January as well), will recover in 2Q21 as inflation will decelerate.Evgeny GavrilenkovAlexander Kudrin