The Russian Macro-numbers are extremely healthy - wonder why Bloomberg doesnt write anything about this… EXTERNAL DEBT PAYMENTS DRIVE CAPITAL OUTFLOW The Central Bank has revised the current account surplus figure for 1H14, lowering it from $44.2 bln to $40.9 bln. The surplus declined to $11.4 in 3Q14 bln due to seasonality. The 9m14 tally was still strong at $52.3 bln, compared with $26.1 bln in 9m13. Due to the revision in 1H14 statistics, we downgrade our full-year forecast from $67 bln to $70 bln. The contraction in the current account surplus in 3Q14 was accompanied by a decrease in net capital outflow to $14 bln (versus $72.3 bln in 1H14). Curiously, despite increased geopolitical risks in 3Q14, capital outflow was milder than in the relatively calm 2Q14 ($23.7 bln). Also rather interesting was the change in external debt, which slid $52.8 bln in 3Q14 to $678.4 bln. Russian corporates and banks were scheduled to redeem $37.5 bln last quarter. The rest of the reduction was likely related to a revaluation of ruble and euro-denominated external debt against the backdrop of the Russian currencys depreciation and the dollars strength against the euro. We can draw two conclusions from these numbers. First, difficulties with refinancing external debt were rather significant in 3Q14. Second, a sizable chunk of capital outflow was related to external debt payments. Over 9m14, exports totaled $383.8 bln, in line with the 9m13 figure, while imports shrank 6.3% y-o-y to $232.7 bln. The latter combined with slowing retail sales growth illustrates the effect of import substitution. As a result, the trade surplus widened to from $135.1 bln to $151.2 bln over this period. This was the main cause of the current account surplus. RUSSIAS EXTERNAL DEBT FALLS SHARPLY IN 3Q14 On Friday, the Central Bank published its estimation that the countrys external debt had dropped by more than 7% to $678.4 bln (against $731.2 bln as of July 1) as of October 1, 2014. This is the lowest figure since 1Q13 and the largest Q-o-Q drop since 2009. The main reason for the drop is the closure of international markets to Russian borrowers due to US and EU sanctions. Domestic companies and banks are now forced to either refinance their external debt from domestic sources or repay the debt using their own funds. The 8% ($17 bln) drop in bank debt and 6% ($27 bln) reduction in corporate debt in 3Q14 is also not surprising. In all likelihood, this tendency will continue at least through year end, which should lead to a reduction in Russias external debt/GDP ratio, which, in turn could positively affect the countrys credit rating. It is also worth noting that holdings of OFZs by nonresidents fell from $29 bln to $24 bln (a drop of R44 bln in ruble terms considering the ruble depreciation), which reflects a decrease in interest in the OFZ market among nonresidents amid sharp fluctuations in the ruble. We expect that foreign OFZ holdings may further reduce through year end.
Posted on: Tue, 14 Oct 2014 15:07:46 +0000
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