Russia's current account balance slipped into a deficit of $0.5bn in July for the second time since the war in Ukraine began, falling from a surplus of $5.1bn recorded in June, according to data released by the Central Bank of Russia (CBR) on August 14. (chart)

The shift was driven by a narrowing trade surplus and a widening services deficit, alongside the accrual of dividends by Russian companies.

The last time the current account went into deficit was in July 2023 when it fell to $0.3bn. Despite the July deficit, the current account balance for the first seven months of 2024 showed a surplus of $39.7bn, up $16.2bn y/y.

"The trade surplus shrank to $8.1bn in July from $11.5bn in June, primarily due to declining prices for certain goods and reduced volumes of Russian exports," the Central Bank reported. Meanwhile, the services deficit expanded to $4.2bn in July from $3.7bn the previous month, largely attributed to a seasonal increase in demand for travel services.

Dividend payments by Russian issuers, notably Sberbank, also played a role. These payments not only reduced the primary income surplus but also increased net liabilities in the financial account, as some dividends were accrued to C-type accounts, the Central Bank added.

In recent days, the rouble has been under pressure despite increased sales of yuan on the currency market by the Central Bank. From August 7 to 13, the ruble’s official exchange rates against the dollar and the euro, determined in the over-the-counter market, weakened by approximately 8%, while its exchange rate against the yuan, set in the exchange market, depreciated by only 2%, reports Vedomosti. The Central Bank suggested that this disparity might be linked to the impact of sanctions imposed on the Moscow Exchange and the National Clearing Centre on June 12.

"Yuan liquidity tensions resurfaced earlier this month," the Central Bank noted, pointing out that it remains the main provider of yuan liquidity via currency swaps on the Moscow Exchange. However, the Bank indicated that this liquidity might not be efficiently redistributed across other segments of the domestic currency market.

The Central Bank assessed that the ruble has approached "equilibrium" levels, estimating an average of RUB92 per dollar in the second half of 2024 and an indicative rate of RUB93 per dollar by year-end. Nonetheless, it warned that factors related to the new operational environment of the currency market would continue to exert significant influence on the exchange rate. "Volatility spikes are likely to remain a typical feature for the ruble in the foreseeable future," the Bank concluded.