Capital outflow in 2014 – far short of a record

Comparing with the crisis 2008, these volumes of capital outflow are far short of a record. Indeed, the formal figures are higher than those in 2008, but the last year outflow peak fell on the 5-month period beginning in September 2008 and ending in January 2009, i.e. it appeared to be divided between various accounting periods. The Central Bank's FX interventions alone amounted to about $210bn during those months, and the outflow, with correction for bank's foreign exchange accounts with the Central Bank, amounted to $225bn during the same period. So, overall, worse things happened.

The current increase in net outflow is largely associated with the contraction of inflow of external liabilities rather than the growth in foreign assets. It is probably the change in the monetary regime that is largely responsible for that, making the return on investment in foreign exchange less predictable.

In fact, gross outflow (purchases of foreign assets) in 2014 increased only through foreign exchange cash, i.e. mostly through individuals. The Bank of Russia estimates that the volume of foreign exchange cash changed by $34bn in the non-banking sector of the economy in 2014 (to compare: a total of $25bn in 2008 or $35bn in between Q4 2008 and Q1 2009).

Another adverse trend is that the external financing channel is going to be blocked harder, maybe for a longer period of time, for the Russian economy. Over the past two quarters of 2014, external liabilities saw a contraction of more than $50bn, including the reduction of foreign direct investment which were increasingly growing throughout the entire period between 2008 and 2009.

Mikhail Khromov, Head of Gaidar Institute's Center for Structural Research