Reduced hard currency inflows: exports decrease, ruble depreciates
The nation is receiving fewer and fewer funds in foreign denominations, as shown by the preliminary assessment of the balance of payments released by the Bank of Russia.
This is the cause of the difficulties for the ruble. At present, the key source of foreign exchange is export activity, which is diminishing: $39.1 billion in September, $36.6 billion in October and $32.2 billion in November.
Imports show greater stability: $26.8 billion, $27.5 billion and $25.9 billion respectively. Consequently, the trade balance (the difference between exports and imports) dropped by nearly a half: from $12.4 billion in September to $6.3 billion in November. MMI analysts point out that this represents the lowest figure since July 2023.
Russia is cut off from global capital markets, and goods trade surpluses represent the nation’s primary source of foreign exchange. This source funds the deficit in services trade (international tourism), the repayment of external liabilities, and the demand for foreign assets from individuals and enterprises, MMI analysts state. They conclude that $6 billion per month is insufficient to satisfy all of this foreign exchange demand, and «the country cannot sustain that level of imports».
Moreover, a trade surplus doesn’t invariably equate to the availability of a corresponding volume of foreign currency. Furthermore, a considerable portion of trade is now transacted in rubles. Consequently, net sales of foreign currency by the 29 largest exporters in November reached their lowest point since July 2023, according to the Bank of Russia. Raiffeisenbank analysts indicate that this notably impacted the weakening of the ruble in November.
MMI analysts foresee two potential solutions: ruble devaluation with subsequent inflation increase or restriction of imports and decrease in demand for foreign assets in favor of ruble denominated key rates.
And all this is unfolding against a backdrop of relatively elevated oil prices, the decrease of which owing to the slowing of the Chinese economy, the move to green energy and US policy appears unavoidable — they mention.