According to data from the Russian Central Bank on August 14, Russia’s current account slipped into a deficit of $0.5 billion in July for the second time since the start of the war in Ukraine. In June, there had been a surplus of $5.1 billion. (Diagram)
The reasons for this change were a declining trade surplus and a growing deficit in the services sector as well as dividend payments by Russian companies.
The last time the current account was in deficit was in July 2023, when it fell to $0.3 billion. Despite the deficit in July, the current account recorded a surplus of $39.7 billion in the first seven months of 2024, an increase of $16.2 billion from the previous year.
“The trade surplus shrank to $8.1 billion in July from $11.5 billion in June, mainly due to falling prices for certain goods and lower volumes of Russian exports,” the central bank reported. Meanwhile, the services deficit widened to $4.2 billion in July from $3.7 billion in the previous month, largely due to seasonally increased demand for travel services.
Dividend payments by Russian issuers, in particular Sberbank, also played a role. These payments not only reduced the primary income surplus but also increased net liabilities in the capital account, as some dividends flowed into type C accounts, the central bank added.
In recent days, the ruble has been under pressure on the foreign exchange market despite increased yuan sales by the central bank. From August 7 to August 13, the ruble’s official exchange rates against the dollar and the euro, determined on the over-the-counter market, weakened by about 8%, while its exchange rate against the yuan, determined on the foreign exchange market, weakened by only 2%, reports VedomostiThe Central Bank suspects that this discrepancy may be related to the impact of the sanctions imposed on the Moscow Stock Exchange and the National Clearing Center on June 12.
“Tensions over yuan liquidity resurfaced earlier this month,” the central bank noted, stressing that it remains the main supplier of yuan liquidity through currency swaps on the Moscow Exchange. However, the bank suggested that this liquidity may not be efficiently reallocated to other segments of the domestic foreign exchange market.
The central bank concluded that the ruble had approached an “equilibrium level” and estimated an average rate of 92 rubles per dollar in the second half of 2024 and an indicative rate of 93 rubles per dollar by the end of the year. Nevertheless, it warned that factors related to the new operating environment of the foreign exchange market would continue to exert a significant influence on the exchange rate. “Volatility spikes are likely to remain a typical feature of the ruble in the foreseeable future,” the bank concluded.