Data Revision by the RF Central Bank Helps Capital Outflows fr om Russia Stay within the Official Forecast Level

The forecast was based on a primary estimation of the balance of payments for the first three quarters of 2012, which was released by the Bank of Russia in early October 2012. The published data indicated that, over the first 9 months of 2012, net capital outflow from the non-governmental sector amounted to $ 57.8bn. It should be noted that this figure is by $ 1bn higher than the forecast annual volume of capital outflows. 

In late December, the Bank of Russia published its revision of the balance of payments for the first three quarters of 2012, wh ere certain figures had undergone some significant alterations. Thus, the current account was down on its estimated value by $ 10.8bn, including trade in goods and services – by $ 7.9bn. In contrast, the financial account was up by $ 3.1bn. Besides, the estimated inflow of banks’ liabilities was up by $ 4.4bn; the estimated inflow of other sectors’ liabilities shrank by $ 9.9bn; the estimated value of other sectors’ direct investment was reduced by the same amount – $ 9.9bn. Besides, the revised value of net errors and omissions (which, in accordance with the methodology applied by the Bank of Russia, are treated as financial operations of the non-governmental sector) dropped by $ 7.9bn. As a result, the revised value of net capital outflow over the first three quarters of 2012 is now $ 47.4bn, which is by $ 10.4bn below the primary estimate that was used as the basis for our forecast. 

The balance of payments for 2012 for the first time incorporated an alternative estimate of net capital outflow. The Bank of Russia emphasizes the fact that the year 2012 saw an upward movement of the currency swap operations carried on by the RF Central Bank with credit institutions  (the banks’ sector in the balance of payments methodology). In this connection, the RF Central Bank published revised data on the financial operations of banks, operations with reserve assets, and net capital import/export in the non-governmental sector. Currency swap operations had the strongest impact on the balance of payments in Q4, when their volume rose to $ 7.4bn, and in per annum terms – to $ 8.8bn. The volume of operations with reserve assets and the volume of capital outflow were accordingly adjusted by that value. 

While the official estimated value of net capital outflow in 2012 was $ 56.8bn, including $ 9.4bn in Q4, the revised values amounted to $ 65.6bn and $ 16.8bn respectively.  These figures are pretty close to the latest forecast released by Bank of Russia ($ 67bn) and published in the Main Directions of the Single Government Monetary Unified Policy for 2013 and the Period of 2014 and 2015.

In our opinion, the revision more accurately reflects the actual movement of capital flows. “Currency swap operations” represent short-term (“overnight”) refinancing of banks in exchange for foreign currency, at a fixed exchange rate. By carrying out such operations, those banks that hold foreign currency as part of their assets (representing, in fact, their foreign assets) can obtain short-term ruble-denominated refinancing. However, their reports actually state that, for the period of a given swap operation, these currency assets are transferred to the Bank of Russia are recorded as part of its international reserves. By the strength of their influence on the balance of payments these operations are similar to banks’ foreign currency accounts held with the Bank of Russia in 2008–2009, when banks were subject to constraints imposed on their investment in “genuine” foreign assets. Then, the actual volume of capital outflow was also underestimated, its reported value being less than the actual one by the amount of monies held in the Bank of Russia’s currency accounts. 

With due regard for the primary estimate for the first three quarters of 2012 and the adjustment by the value of currency swap operations, the resulting per annum capital outflow should amount to $ 76.0bn, which is compatible with our forecast’s margin. However, if the revised data for the first nine months of 2012 are taken into account, and a standard methodology for the estimation of reserve assets is applied (without an adjustment for currency swaps), then our forecast volume of net capital outflow in 2012 would have been equal to $ 59.5bn – a figure than differs from the actual value by less than 5%.

M.Yu. Khromov – Senior Expert of the Structural Research Center