/ world today news/ Last year, exports from Russia were more than three times higher than imports. The balance of payments account surplus set a new all-time high of $120 billion. This allowed Russia to accumulate reserves unprecedented in history – already in August they exceeded 600 billion dollars. Can Russia continue its macroeconomic success in 2022?
The current account of the balance of payments grew 3.3 times to a record $120.3 billion, up from $36 billion in 2020, according to data from the Central Bank of the Russian Federation. Both exports and imports increased last year, but the former seriously outpaced the latter.
Thus, Russia earned $489.8 billion from exports (an increase of 47%), while spending only $303.9 billion on imports (an increase of 27%). The difference between these figures resulted in a record current account surplus of $120.3 billion.
“This is not only more than three times higher than the level of the previous, crisis year 2020, but also higher than the previous historical maximum of 115.7 billion reached in 2018,” says Olga Belenkaya, head of the department for macroeconomic analyzes in “Final”.
Russia not only returned to the level of income before the pandemic, but also significantly increased its income compared to 2019: oil and gas exports in value terms increased by 16.6%. Of course, the favorable external situation helped in many ways – prices and demand for raw materials increased.
Thanks to the unprecedented rise in gas prices, its exports in value terms increased by more than a third, leading to an unusual situation. For the first time in 13 years, the value of gas exports exceeded the revenue from the export of petroleum products. This happened in the fourth quarter of 2021, when Russia exported $20.8 billion worth of natural gas and only $18.5 billion worth of petroleum products. In the fourth quarter, Russia earned 7.7 billion from gas exports, or 1.6 times more than in the third quarter.
Prices in gas contracts with Gazprom rose in the fourth quarter, as most of the contracts from previous years were tied to the spot price at the request of the Europeans themselves, who are now paying for their wishes.
Russia earned a third more from gas sales than in 2019 before the pandemic, 2.6% more from petroleum product exports and 4% more from LNG exports. Exports in monetary terms fell from 2019 only on oil (down almost 10%). The problem here is not the price – oil also rose significantly last year. The average price of Urals oil in 2021 is $69, which is 65% higher than the average annual level for 2020, Belenkaya noted.
It is all because of the volume of exports, which could not be increased to the level of 2019 due to restrictions from OPEC+. However, the unfreezing of production volumes continues. However, compared to 2020, there is growth in both money and volumes. And already in 2022, the situation with the export of crude oil according to these indicators should reach the level before the pandemic. In addition, its price continued to grow and for the first time reached the high values since 2014 – 89 dollars per barrel.
Belenkaya notes that there is also a significant increase in the price of other Russian export goods – metals, agricultural products and fertilizers. Thus, the export of fertilizers for 11 months of 2021 in monetary terms increased by 66-84%, the export of machinery and equipment – by 32%. Amid the energy crisis in China, electricity exports almost doubled in physical terms and jumped 2.6 times in value terms.
Exports of agricultural products from Russia increased by almost 22% last year to more than $36 billion. From the sale of grain, Russian exporters earned 11 billion rubles (increase in exports by 10%), from the sale of fish and seafood – 5.3 billion (increase by 34%), from the supply of oil and fats – 7 billion (increase of 48%), in the sale of food industry products – 4.7 billion (a growth of 13%), meat and dairy products – almost 1.5 billion (increase by a third). The main buyers of Russian agricultural products are the European Union, Turkey and China in third place. All of them significantly increased their imports from Russia during the year.
“According to the results of January-November 2021, Russian non-commodity non-energy exports amounted to $170.5 billion, and based on the results of the whole year, we estimate a growth of 36%, to over $191 billion, which became a new historical high.” said the head of the Russian Export Center Veronika Nikishina.
Growth was observed in almost all product segments, but the largest growth was seen in ferrous and non-ferrous metals, fertilizers, woodworking products, chemicals, plastics and power equipment.
The pandemic has created new opportunities for local producers to enter global markets and gain a foothold in them, Nikishina believes.
As a result, Russia has not increased its dependence on oil and gas revenues.
“The share of non-oil and gas exports increased to 49% from 45% in 2020, but remains significantly lower than in previous years. In 2019, it was 57%,” notes Belenkaya. “This is noticeable progress in the Russian economy, almost no one talks about the raw material needle, although there is always something to work on. Diversification of sources of income is not a quick process.” says Vladimir Ananiev, analyst of “Exant”.
The record surplus allowed Russia to seriously accumulate international foreign exchange reserves. According to the Central Bank, they were replenished by 63.5 billion dollars. “Unfortunately, it was not possible for ordinary citizens to feel the benefits of this in the form of a strengthening of the ruble exchange rate due to the mechanism of the budget rule, where oil and gas windfalls are paid by the Ministry of Finance, and also due to the large outflow of capital ($72 billion) and geopolitical risks,” says Belenkaya. And this is an important advantage for Russia in the face of Western sanctions and the threat of military confrontation in Ukraine. “The risk of sanctions will necessarily require additional costs, and the country will have somewhere to get these funds,” says Ananiev.
However, judging by the external situation and in the absence of new sanctions and war, experts expect no less “fruitful” year for Russia in 2022.
“This year we also expect strong export earnings – this will be supported by expected growth in Russian oil production and exports in line with the gradual easing of OPEC+ restrictions, as well as a generally favorable environment in global commodity markets,” says Belenkaya .
“Apparently the Omicron strain has not spooked the markets and energy commodity prices will continue to rise as economies recover.” That’s one factor. The other is geopolitics. If the ruble remains weak, the budget will continue to be replenished at a record pace”, adds Vladimir Ananiev. The flip side of the coin will be accelerating inflation. And 2022 will be marked by the fight against it both in Russia and in Western countries by tightening monetary policy and raising key interest rates. Not only could the new sanctions hinder but also slow the growth of China’s economy, which is the largest consumer of raw materials.
Translation: V. Sergeev
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