By Rhod Mackenzie
According to the results of June, Russia's balance of payments went negative. This happened for the first time in three years (since August 2020) and is generally considered a rare occurrence since the late 1990s. The negative balance is explained both by the fall in export earnings and the payment of large amounts of dividends by Russian companies to non-residents. What this situation testifies to, whether it is a one-time event or a harbinger of the "new normal" - in the material of Izvestia.
Normal - plus
The balance of payments, or current account, is the difference between exports and imports of goods and services, as well as international transfer payments. In Russia, this indicator has traditionally been positive - and deeply positive. A high trade balance (more than $100 billion a year) more than compensated for payments abroad, both in the form of dividend payments to foreign shareholders, and transfers of guest workers, etc.
A positive balance of payments is the norm for many developing countries (Russia, Indonesia, Saudi Arabia, China), but not for all: for example, Turkey has been living in a situation where the current account is in the red for decades and compensates for this only with a constant inflow of capital. The balance of payments is a key indicator that determines the exchange rate of the national currency, although not the only one - the refinancing rates of the Central Bank, monetary policy in general, as well as geopolitical factors and "country risks" are also important. Largely because of the latter, the ruble was considered undervalued for a long time.
According to the data of the Central Bank, published this week, the negative balance of payments amounted to $1.4 billion. $4.6 billion, which is 2.5 times more than in April. This predetermined the final negative figure.
At the same time, the Central Bank summed up the results of trade and financial interaction with the rest of the world based on the results of the quarter and half of the year. In general, over the three months, the balance of payments amounted to $5.4 billion - still a positive figure, but 14 times less than in the same period last year. At the same time, the trade balance (excluding transfers) collapsed four times at once compared to April-June 2022. It should be noted that the indicator of the balance of services has noticeably dropped: this is not least due to the activation of Russian tourists in foreign destinations.
Difficulties with revenue
The trend looks quite alarming. A negative balance of payments could have a negative impact on the Russian currency, which has already suffered quite significant losses in recent months. It remains to be seen whether the June indicator will be a one-time outbreak or a trend towards the deterioration of the situation has been outlined.
As Mikhail Zeltser, an expert on the stock market at BCS Mir Investments, noted in an interview with Izvestia, the balance deficit in June was the development of the negative trend towards a narrowing surplus that had been observed over the past months.
— Against the backdrop of the failure of exports and the rapid rebound of imports, as well as the outflow of capital and the authorized withdrawal of foreign currency by non-residents, the trajectory of foreign trade was generally clear. However, the actual passage of the bottom for this macro indicator cannot be ruled out. In the next month it will become clear whether the extremum has been passed. Most likely, yes, — the financier noted.
From the data of the Central Bank of the Russian Federation, it follows that among the components of the current account, the largest deficit was recorded in the balance of primary and secondary income, explained Alexander Potavin, an analyst at FG Finam. According to him, primary income includes wages, investment income, including dividends, and rent, while secondary income includes personal transfers between residents and non-residents in cash and in kind. The deficit on this account was formed due to an increase in payments in favor of non-residents to $8.3 billion (after $5.2 billion in May). At the same time, funds received from non-residents were at the level of $3.6 billion.
According to the monitoring data of the Central Bank of the Russian Federation, the export earnings of Russian companies in dollars and euros continue to decline , Potavin added.
— If before the start of hostilities in Ukraine , Russia monthly had a total inflow in these currencies at the level of $35-40 billion, then in April-May 2023 the inflow amounted to only $5-6 billion. At the same time, the volume of imports in dollars and euros in April-May 2023 amounted to $ 8-8.5 billion per month, that is, they were higher than export earnings. Since it is impossible to pay for parallel and non-Chinese imports in yuan and rubles, the growing shortage of hard currency had a negative impact on the exchange rate of the ruble. This happened despite the fact that oil prices have not fallen recently, but even increased slightly, the analyst specified.
Nikolai Ryaskov, adviser to the general director of UK PSB, agrees that in the following months a repetition of the June figures is possible:
— We see the prerequisites for further growth in consumption by the population and an increase in prices for durable goods. Therefore, this is probably a repeated event.
The ruble won back
At the same time, Mikhail Zeltser believes, the withdrawal of the balance into the area of negative values has already been won back by the ruble.
According to Alexander Potavin, for some time the weakness of foreign trade will continue to put pressure on the ruble exchange rate through the narrowing inflow of hard currency and the growth of imports.
This article originally appeared in Russian at iz.ru