The net outflow of capital from Russia in January-October 2018 was up to $42.2bn, a three-fold increase from the $14bn that left Russia in the same period a year earlier, according to preliminary estimates from Central Bank of Russia (CBR), it was reported on November 12.

Approximately half of this amount is accounted for by operations of banks to repay external liabilities, the other half is due to business purchases of foreign financial assets. A quirk of Russian national accounts is that any money reinvested in the foreign businesses of foreign-based companies owned by Russian entities is counted as capital flight.

Earlier, the central bank reported that net capital outflow in January-September amounted to $31.9bn, suggesting that in October alone capital flight jumped to $10.3bn in the month.

The central bank is forecasting total capital flight will end the year at $66bn, based on the assumption of an average annual oil price of $72 per barrel, although this will fall to $25bn in 2019.

If capital flight does hit $66bn it would make this year the second worst year since the crisis years of 2008 and 2014 when capital flight soared to $137bn and $152bn respectively. Capital flight has been running at a rate of at least $50bn every year between 2008 and 2015, but fell noticeably in 2016 to $18.5bn and 2017 to $27.3bn.

Even though the outflows are painful, in terms of a share of GDP capital flight has fallen steadily from the 12.6% in 2014 – the worst year on record – to 4.1% this year assuming a $66bn outflow.

The Russian Ministry of Economic Development is more optimistic, forecasting in September annual capital outflow of $41bn for this year, or 2.5% of GDP.

Capital flight has been increasing in the last few years as the sanctions battle with the US becomes more intense. In 2017, the net outflow of capital from Russia increased 1.6 times y/y to $31.3bn.

The capital outflow is currently easily covered by a ballooning current account surplus that has been buoyed by higher than expected oil prices. For the first 10 months of 2018, the current account surplus reached $87.9bn, an increase of four times over the same period last year.

The positive balance of payments made it possible to continue accumulating international reserves and increase them by $35.7bn so far this year, despite the capital outflows, mainly due to the acquisition of foreign currency according to the budget rule for additional oil and gas revenues.