The current account narrows in 2Q23 but could widen in 3Q23 amid a weaker ruble, while the latter will support budgetary revenue

RUSSIA ECONOMICS - In Brief 12 Jul 2023 by Evgeny Gavrilenkov

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The CBR reported that Russia's current account surplus narrowed to $5.4 bn in 2Q23 from $20.2 bn in 1Q23. The regulator also mentioned that in June alone, the current account surplus turned negative. Note, that these data are very preliminary and will be revised in the future. Nonetheless the 2Q23 balance of statistics fully matches trends in the FX market, such as a weakening of the ruble to over $/R 90. Apart from decreased exports and recovered imports the CBR mentioned another reason for the contraction of the current account surplus, particularly in June. The regulator meant increased dividend payments to foreign investors. However, the impact of this factor should not be overestimated and future current account surplus trends will be determined mainly by the performance of the trade balance – mainly by its import side. So far, as it follows from the CBR statistics, imports reached $76.9 bn in 2Q23 which was comparable with 2Q21 imports when the Russian economy resumed relatively strong post-pandemic growth. In 1Q23 imports were slightly lower ($74.3 bn). Meanwhile, previously published imports statistics for April 2023 were revised down. In 1H23 exports reached $205.6 and demonstrated a relatively even allocation by quarter and month. As the ruble weakened in June while the oil price climbed up a bit in July, the former factor will likely trim imports while the latter factor will slightly improve export revenue flow. Note that according to Minfin, Urals was traded at about $55/bbl last month, which was below the ceiling imposed by the "unfriendly" forces. A decent level of monthly imports hints that the economy was doing relatively well in recent months (June inc...