Current account surplus drops in Russia

Russia’s current account surplus experienced a substantial contraction to $25.2 billion in the period spanning January to July, marking an 85 percent decline compared to the corresponding timeframe in the prior year. Despite this decrease, the surplus saw a marginal uptick from the figures reported for the initial six months of this year.

In 2022, Russia achieved a record high current account surplus due to reduced imports and robust exports of oil and gas, which maintained a steady inflow of foreign capital even in the face of Western attempts to isolate the Russian economy amid the Ukraine conflict.

The primary driver behind the diminished surplus is a substantial 41.4 percent year-on-year drop in oil and gas revenues during the first seven months of the current year. This decrease has been attributed by the Finance Ministry to lower Urals crude oil prices and reduced natural gas export volumes.

For reference, the current account represents the disparity between all incoming funds to a nation through trade, investments, and transfers, and the outflow of money.

In the comparable period of January to July 2022, the current account had recorded a sizeable surplus of $165.4 billion.

The central bank attributes the depreciation of the Russian ruble this year to a decline in exports and a rapid resurgence in imports. The currency has depreciated by approximately 28 percent year-to-date, further compounding the already significant inflationary pressures.

The central bank cites a notable 68.4 percent drop in the year-on-year trade surplus as a pivotal factor contributing to the overall decline.

Anticipating the trend, the central bank predicts a substantially diminished current account surplus of $26 billion for the entirety of 2023, a sharp contrast to the impressive $227 billion surplus achieved in the previous year.

Concurrently, preliminary data from the Finance Ministry unveiled a widening budget deficit for the period of January to July, amounting to 2.82 trillion rubles ($29.3 billion), equivalent to 1.8 percent of the country’s gross domestic product.