Russia: A large current account surplus in Q1
Overview:
Russia recorded a large current account surplus in Q1 underlining that the Ruble’s recent appreciation has been driven, at least partly, by economic fundamentals. Nevertheless, it is natural that the central bank should be concerned that the currency does not move too far too fast and undercut the economic recovery underway. Moreover, it is also inevitable that financial markets will continue to maintain a positive outlook for the currency of a large oil and gas exporter as the global economy recovers. For the moment, falling inflation gives the central bank cover to continue cutting its key policy rate. However, disinflation will likely prove temporary as growth returns. At that stage, the central bank may have to consider further cuts or controls on capital inflows if the Ruble continues to appreciate.