Russia: Capital outflows slow the rise of FX reserves
Overview:
High oil prices continue to deliver large current account surpluses for Russia. The current account surplus in 2010 was 4.9% of GDP and a surplus of a similar magnitude is likely this year. However, FX reserves are rising rather more slowly than these current account surpluses might suggest, reflecting outflows on the capital account side. These are not of the magnitude seen at the height of the global financial crisis but remain a cause for concern none-the-less. They may reflect growing political uncertainty ahead of parliamentary and presidential elections in Russia or just concerns about the investment climate. What is just as worrisome for the authorities is that high oil and gas export values reflect higher prices much more than they reflect changes in production which has stagnated in recent years.