Russia’s current account surplus has plummeted in the second quarter of this year, according to data released by the central bank. The surplus, which measures the difference between exports and imports, decreased to $5.4 billion from April to June, compared to $76.7 billion in the same period last year. This represents the smallest surplus since the third quarter of 2020.
The decline in the surplus can be attributed to various factors. The profit from foreign exchange dropped by 93%, putting pressure on the ruble. The decrease in the physical volumes of export deliveries and the deterioration in the price environment of Russian export commodities, particularly energy products, contributed the most to the decline in the value of exports. Revenues from energy exports have been severely impacted by Western sanctions, which have banned seaborne exports to the EU and imposed price caps on Russian crude and petroleum products.
Lower crude prices, reduced gas flows to the EU, and a recovery in demand for imports have also played a role in cutting into Russia’s proceeds. Goldman Sachs estimates that decreased oil prices contributed $25 billion to the second-quarter drop in the surplus year-on-year.
The decline in the current account surplus is expected to have implications for Russia’s economy. Bloomberg’s Russia economist, Aleksandr Isakov, predicts that a weaker trade balance will lead to a weak ruble and increased inflation, expecting it to reach close to 5% this year. He further warns that the smaller external balance will hamper Russia’s ability to use capital for acquiring assets and infrastructure to avoid sanctions.
Despite the decline, the central bank still expects a current account surplus of $47 billion this year and $38 billion in 2024. However, these figures are significantly lower compared to the previous year’s surplus of $233 billion.
The decrease in Russia’s current account surplus highlights the challenges the country faces in maintaining a strong trade balance amid ongoing sanctions and global economic fluctuations. As the world economy continues to evolve, Russia will need to find ways to diversify its export base and attract foreign investment to sustain long-term economic growth.
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