Russia: Trade surplus shrinks to a seven-year low in March
May 2, 2016
Russia’s trade surplus totaled USD 6.9 billion in March, which came in well below the USD 15.8 billion surplus registered in the same month last year. March’s reading was also down from the USD 7.4 billion surplus observed in February and represented the smallest monthly gain since April 2009. Due to March’s smaller print, the moving 12-month sum of the trade surplus up to March totaled USD 124 billion, which marked the smallest accumulated trade surplus since January 2010.
Weakness in global demand coupled with the country’s deep recession prompted Russian exports to contract 32.9% year-on-year and record USD 22.1 billion in March. March’s strong contraction followed an equally sharp 31.4% decrease in February. Russia’s shipments abroad have been contracting uninterruptedly at a double-digit rate since November 2014. Meanwhile, imports totaled USD 15.2 billion in March, which represented a 10.9% decrease over the USD 17.1 billion registered in the same month last year. In the first three months of the year, imports contracted an average 12.6%, which marks a slower contraction than the average 16.9% decrease tallied in the last three months of 2015. This suggests that domestic demand is likely gaining some strength at the outset of the year.
Financial market volatility has eased heading into the second quarter and oil prices continued heading north, despite a fruitless meeting in Doha. On 17 April, representatives from 16 oil-producing countries, including major producers Russia and Saudi Arabia, met in Doha to discuss an agreement to freeze oil production in order to bolster oil prices. However, the negotiations failed as tensions between Saudi Arabia and Iran proved to be too large to overcome. Saudi Arabia stated that it refuses to be part of any agreement that would give Iran any leeway. Meanwhile, Iran maintained its stance of not restraining production as it recovers from international sanctions. However, the recent gains observed in global oil markets are mainly the result of a weak dollar and a decline in U.S. production. These developments are positive for Russia. The price for Ural oils continue to rally and in the last trading day of April the prices closed at USD 44.3 per barrel, which was 23.1% higher—remarkably—than than at the end of March. Nonetheless, prices have not recovered yet since they are 30.5% below in annual terms.
Author: Ricardo Aceves, Senior Economist