The CA surplus picked up to USD38.8bn in Q4’18, bringing the 2018 surplus to an all-time high of USD114.9bn or 7% of GDP, according to the preliminary figures published by the CBR. This compares to only 2.1% in 2017 and it is also slightly better than the USD112bn forecast by the CBR in the latest inflation report from December.
The breakdown shows that the improvement is almost entirely a result of higher exports as they rose by 25.4% in 2018, driven by 37% increase in oil exports. Exports of oil products and natural gas also had a significant impact and overall the oil&gas sector was responsible for over 75% of the export growth. Subdued import growth was another reason for the strong result as it rose by just 4.6% in 2018, constrained by weak demand. Services, primary and secondary income accounts also contributed to the higher CA surplus, but the amounts are rather small. The biggest impact came from primary income, where the deficit shrank by USD2bn in Q4 and USD1.4bn in the entire 2018.
The financial account posted outflows of USD77bn in 2018 after only USD14bn in 2017. Net private sector capital outflows picked up to USD36.5bn in Q4 and USD67.5bn in the entire 2018. This is a lot higher than USD25.2bn in 2017, but it does not represent true capital flight. The main impact comes from the suspension of forex purchases by the CBR in August last year, which causes the large CA surplus to be offset in the financial account, rather than in CBR reserves. We estimate this effect at USD33bn in 2018. Sanctions and withdrawal of non-residents from Russian assets had a significantly smaller overall effect. According to the breakdown, the federal government reduced its debt to non-residents by USD5.4bn in the entire 2018. Both banks and the real sector were repaying external debt and increasing foreign assets. CBR forex reserves rose by USD38.2bn in 2018, mainly a result of the forex purchases during the seven months of the year.