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Uralsib -Monthly Macro Outlook, EXTERNAL SECTOR : October 2011.


Export revenue under pressure due to decreasing commodity prices

- Rose to $43.0 bln in August from $42.6 bln in July ($335.4 bln for 8M11)

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- The Urals price decreased 5.3% MoM to $109.4 in August from $115.6/bbl in July

- Gas prices remained unchanged in August at $403.2 per 1000 cum

- Metals prices came under pressure, as aluminum fell 4.8% MoM, nickel fell 6.9% MoM, and copper fell 6.0% MoM

- Russia's exports for 7M11 primarily comprised fuel and energy commodities (58.9% of exports to the CIS and 73.0% to non-CIS countries) and metals (8.0% and 9.2%, respectively)

- We expect exports to reach $518.7 bln in 2011

- Exports primarily driven by price growth (up 39.5% YoY) rather than volume growth (down 4.8% YoY) in July

- We see downside risks to exports in the next few months, due to the possibility of a decrease in commodity prices on the back of increased market volatility and fears of a deceleration in developed economies

Imports rise despite substantial ruble depreciation

- Imports rose to $30.2 bln in August from $27.5 bln in July ($205.0 bln in 8M11)

- Despite 5.4% MoM real ruble depreciation against the dollar in August

- Imports were driven by rapid acceleration of retail trade volumes in August

- Imports to Russia in 7M11 comprised machinery and equipment (34.5% of imports from the CIS and 49.0% of imports from non-CIS countries) and food (13.8% and 15.1%, respectively)

- We expect imports to reach $334 bln in 2011

- Imports in July primarily driven by volume growth (17.6% YoY) rather than price growth (10.9% YoY)

- We see downside risks to imports in the autumn, due to substantial ruble depreciation in August-September on increased market volatility

- Imports may accelerate towards the year-end if market volatility eases, capital outflows decrease, and the ruble appreciates

Ruble depreciates on increased market volatility and large capital outflows

- Real depreciation against the dollar of 5.4% in August after real appreciation of 0.16% in July and real appreciation of 6.5% in 8M11

- Nominal depreciation against the dollar of 3.3% in August after appreciation of 0.27% in July and appreciation of 5.6% in 8M11

- The ruble depreciated another 6.7% in September and 0.7% in 9M11

- Ruble depreciation was slowed by massive currency interventions by the Central Bank, as the ruble hit the lower bound of CBR's flexible currency basket corridor

- The Central Bank feels comfortable about the current corridor and will support the ruble should it come under downward pressure

- Given the high commodity prices, the dramatic acceleration in capital outflow is one of the primary causes of ruble depreciation

- We expect the ruble to appreciate towards the year-end, provided that global market volatility eases, capital outflows decrease, and commodity prices remain around their current high levels

Capital flight dramatically accelerates in the autumn

- Capital flight rose sharply in 3Q11 on increased market volatility and fears that a possible deceleration in economic growth in the US and Europe will have negative consequences for the Russian economy

- Capital outflow in 3Q11 was $18.7 bln after $9.2 bln in 2Q11 ($49.3 bln in 9M11)

- According to Deputy Chairman of the CBR, Alexey Ulyukaev, capital outflow in August was about $3 bln and about $4.5 bln in July, which implies $11.2 bln capital outflow in September

- We expect capital outflow to remain high in the next few months

- Capital outflow this year may exceed $60 bln in 2011, which is higher than the $56.1 bln outflow in 2009

- Capital flight may decelerate towards the year-end, provided that the developed economies continue to grow and market volatility eases


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For further Information please contact: URALSIB Capital, Efremova St, Moscow, Russia,119048

phone:+7(095)788-0888 , fax: +7(095)785-1206
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Publication:Russian Banks and Brokers Reports
Geographic Code:4EXRU
Date:Oct 8, 2011
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