The current account narrows in 3Q22 but is still exceptionally strong

RUSSIA ECONOMICS - In Brief 11 Oct 2022 by Alexander Kudrin

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According to the preliminary estimates published by the CBR, Russia's current account reached $198.4bn in 9M22 as it narrowed in 3Q22 to $51.9 bn (versus $61.8bn in 1Q22 and 76.7bn in 2Q22). The current account remains exceptionally strong and is likely to be so in 4Q22 as well. Exports of goods and services combined declined and reached $153bn in 3Q22, as in 2Q22 they were at $162.2bn. Imports of goods and services increased in 3Q22 to $84.6 (up from $71.9 bn in 2q22). The decline in exports in 3Q22 relative to the previous quarter stemmed from lower energy prices and reduced volumes. An increase in imports indicate that domestic demand began to recover as imports moved close to 1Q22 level ($88.8 bn). Statistics published by the CBR, also indicate that the balance of primary and secondary incomes was strongly negative in 9M22. It was more negative than in 9M21, indicating that despite the restrictions imposed amid "special military operation" in Ukraine, the repatriation of profits by foreign investors continued. As this operation is far from being over, it will contribute to more effects going forward. One of them can be, probably, seen not in a distant future. As one can somehow associate the recovery in domestic demand in 3Q22 with a recovery in consumer lending, as rates in August (latest available official statistics) continued to decline, in 4Q22, things may change again. Scattered data published in various sources indicate that consumer lending rates started to climb after the Russian leadership ordered partial mobilization in September. It encouraged hundreds of thousands of people (young men and more senior at working age) to decide to flee the country. Hence...