RUSSIA REPORTS A MASSIVE CURRENT ACCOUNT SURPLUS…

The Central Bank of Russia (CBR) on June 30 released balance-of-payments data for the first quarter of 2000. They show that Russia is heading for a record current account surplus in 2000, thanks to booming exports, slow growth in imports–and very little debt servicing.

Russia’s current account–which measures the exports and imports of goods, services, and transfers–registered an US$11.2 billion surplus during the first three months of 2000. This figure, if it withstands subsequent revision, would be Russia’s largest quarterly surplus since the CBR began keeping records in 1996. It is due in large part to surging exports, which hit some US$23.3 billion, compared to only US$15.5 billion in the first quarter of 1999–a 50 percent increase. High oil prices account for much of the windfall: According to Russian customs data, the price of a ton of exported crude oil during the first quarter averaged US$170, compared to only US$61 during the first quarter of 1999. The large trade surplus also reflected relatively weak growth in imports, which at US$9.7 billion were only 8 percent larger than they had been in the first quarter of 1999. The resulting US$13.6 billion trade surplus was larger than the surplus recorded during the first two quarters of 1999–when Russia posted a record US$25 billion surplus.

In addition to the trade surplus, Russia’s current account position is traditionally influenced by net interest payments made on its foreign debt. During the first three quarters of 1998–when Russian borrowers were struggling to remain current on their obligations to external creditors–Russia averaged nearly US$3 billion in quarterly net interest payments. In the first quarter of 2000, by contrast, Russia only made US$976 million in net interest payments, the smallest sum since the first quarter of 1997. While trade flows remain the dominant influence on the current account balance, Russian borrowers continue to benefit from not fully servicing their debts.

The rapid growth now being registered in Russian production, incomes, and spending suggests that imports are likely to stage a stronger recovery later this year. But there is little reason to anticipate large changes in the other drivers behind Russia’s current account surplus. Oil and other commodity prices are expected to remain high, and since Moscow has not yet finalized debt-rescheduling agreements with the London and Paris Clubs of external creditors, an upsurge in debt servicing seems most unlikely. If these trends continue, Russia could report a current account surplus in excess of US$40 billion this year.

…AND A CONTINUING DEARTH OF FOREIGN INVESTMENT.