Russia Sees Further Drop in Capital Outflows as Economy Adjusts

(Bloomberg – bloomberg.com – Olga Tanas, Anna Andrianova – April 14, 2015)

Russian capital outflows will slow further as bonds and the ruble stage a comeback following a sell-off last year, Finance Minister Anton Siluanov said.

Net outflows will slow to $15 billion in the second quarter after a “sharp decline” in the previous three months, bringing the total for the year to about $90 billion, Siluanov said Tuesday at his ministry’s annual meeting in Moscow. Russia bore the brunt of economic damage in the first quarter and growth may resume in the second half, he said.

“Financial markets have stabilized, the ruble and Russian sovereign bonds became some of the most profitable assets this year,” he said. Even so, “it’s now that we are experiencing the most difficult situation in the real economy.”

A crash in oil prices last year and sanctions imposed by the U.S. and the European Union over the crisis in Ukraine have spurred capital flight, accelerated inflation and weakened the country’s currency, which lost about half of its value last year before rebounding in 2015. That’s pushing the economy of the world’s largest energy exporter into its first recession since 2009 and forcing the government to run up its biggest budget deficit in five years.

The ruble has strengthened 18 percent this year, making it the best performer among more than 170 world currencies tracked by Bloomberg. It traded 0.7 percent stronger at 51.6790 versus the dollar at 1:52 p.m. in Moscow.

Net private capital outflows eased to $32.6 billion in the first quarter, down from $72.9 billion in the previous three months, according to the central bank. Russia hasn’t had a full year of inflows since 2007, central bank data show.

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