The current account surplus of Russia’s balance of payments in 5M23 dropped to $22.8bn from $123.8bn for the same period of 2022, according to the latest estimates by the Central Bank of Russia (CBR). Such a sharp year-on-year drop is almost entirely due to the reduction of the trade surplus by $99.6bn.

In month-on-month terms the current account surplus increased by a mere $0.2bn in May. (chart)

bne IntelliNews already reported that the CA surplus is expected to tumble to $66bn in 2023 from $227bn a year earlier. The situation has flipped since spring 2022, with the volume of Russian exports and prices falling and imports being on the rise, the CBR commented.

The deficit in foreign trade in services has also risen markedly from $5.7bn in 5M22 to $9.3bn in 5M23, out of $4.1bn generated in the last two months of April and May.

According to the Central Bank's baseline forecast for 2023, updated in late April, with an average annual oil price of $55 per barrel, the current account surplus would amount to $47bn, (a surplus of $117bn in goods trade balance, a deficit of $23bn in services trade and a deficit of $47bn in primary and secondary income).

Analysts surveyed by Kommersant note that with the mounting sanctions pressure on exporters and with commodity markets deteriorating, the CBR’s forecast currently looks too optimistic.

The recent ruble weakening is seen as a combination of the fundamental influence of the balance of payments (realised with a lag), decreased liquidity on the Russian currency market, and one-time factors such as large Fx transactions in the foreign assets pulling out of Russia deals.

"The current account balance will always be such as to meet the demand for saving in foreign assets (i.e. the demand for capital outflows), and the exchange rate will be exactly such as to provide an appropriate current account," Alexander Isakov of Bloomberg Economics argued.