Capital Outflows from Russia to Continue in January

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Jan. 23 – Central Bank Chairman Alexei Ulyukayev said on Thursday that the net capital outflows that plagued Russia in 2011 and weighed on the ruble are continuing in January, but the country may experience net inflows during 2012.

“We can see that outflows are continuing, because we have had to conduct sales of foreign currency this month,” Ulyukayev said at a Moscow economic conference.

Russia’s central bank has sold some US$600 million to support the ruble since the start of the year, Ulyukayev said earlier.

About US$84.2 billion left the country in 2011 according to a preliminary Russian Central Bank report – more than double the total from 2010, when it was averaged out at US$34 billion.

Analysts believe the trend will not change until at least the middle of 2012.

Anton Saphonov, analyst from Investcafe told Russia Today that the outflow is caused by Russian businessmen preferring to keep their active assets abroad, because of ruble currency risks and the election situation in the country.

“The trend will gain speed at least until the second quarter of 2012, because global economy risks continue,” the analyst added.

The Central Bank’s “Private Sector Net Capital Import/Outflow Report” indicates capital outflow increased from US$19 billion in the third quarter last year to US$38 billion in the fourth quarter.

The regulator also said the total credit granted by Russian banks had grown dramatically in 2011. Lending to private individuals rose 35.9 percent and lending to companies grew by 26 percent.

Net capital outflows from the banking sector in 2011 constituted US$26 billion, while the outflow from other sectors reached US$58 billion.

Deputy Chairman Alexei Simanovsky said lending by Russian banks in 2012 was likely to rise 20 percent to 25 percent, according to Interfax. However, record bank profits in 2011 are unlikely to be repeated, he said.

Ulyukayev has also added that consumer prices will rise by less than 1 percent in January, traditionally a month of high inflation, while adding that the level interest rates are “comfortable, nearly optimal.”