Capital Outflow from Russia Reached US$8 billion in April

May 21 – Net capital flight from Russia in April came to around US$8 billion and the country will also likely record capital outflows in May, Interfax news agency quoted Deputy Economy Minister Andrei Klepach as saying on Monday.

Capital outflow will probably continue in May, Klepach said at a State Duma budget committee meeting.

“Outflow was US$35 billion in first quarter of 2012. There was outflow in April also – we estimate US$8 billion – and it looks like it will be substantial in May as well,” he said.

“Capital outflows are much more severe than we expected,” Klepach said.

Capital flight from Russia nearly doubled from a year ago in the first quarter of 2012 to US$35.1 billion, according to the central bank’s data. The net outflows amounted to US$35 billion in the fourth quarter of 2011.

“To some extent, the capital outflow could be explained by an aggravation of the global sovereign debt crisis, which caused capital flight from emerging markets to so-called safe havens,” the central bank’s Chairman Sergei Ignatyev said.

The Ministry of Economy has said it expects capital to start flowing into Russia in the second half of 2012 and that net outflows for the year would be US$15 billion to US$25 billion.

Meanwhile, a Reuters poll of analysts and economists from late April showed Russia could see around US$55 billion in capital flight in 2012.

Net capital flight for the whole of 2011 was US$80.5 billion, according to Central Bank data. The regulator attributed the outflows to a lack of investment opportunities and political uncertainty ahead of December’s parliamentary vote and March’s presidential election.

“We proceed from the fact that in the long-term this trend will peter out and there will be an in-flow,” the deputy minister continued.

Klepach also noted that the capital outflow is referred to and is assessed with regard to private capital.

“As regards government funds and the reserve fund, in fact they produce no impact,” he claimed. The current high capital flight, according to Klepach, is the result of a high balance of trade operations.

“I would say that there is no direct connection between the fund and the capital run,” the deputy minister emphasized.