Russia’s capital flight: not an urgent issue yet but looking bad
2012-01-13 11:03:08
Russia’s total capital outflows in 2011 were $84bn as political uncertainty in the fourth quarter caused volumes to rise sharply.
However, while the year’s outflows are the second largest ever recorded in absolute terms, they are not as significant when measured against overall GDP.
Outflows averaged 5 per cent of GDP last year, compared to 15 per cent in 2008/2009 and 12-15 per cent in 1998, years which saw the two worst economic crises in Russia’s 20 year post-communist history, according to Ivan Tchakarov of Renaissance Capital.
He wrote to investors:
Although this figure is significant as an absolute amount, it looks much more benign by historical standards when evaluated as a share of GDP.
Most of the total was recorded in the fourth quarter, following the news at the end of September that Vladimir Putin, the prime minister, would be returning as president in this year’s elections. Following that announcement, $37.8 bn in assets were transferred abroad.
In macro economic terms, Russia’s large capital flight is sustainable because it is more than made up for by an oil and gas driven trade surplus. However, most economists predict that between 2013 and 2015 Russia’s balance of payments will turn negative, meaning the country will have to tackle its business climate in earnest to keep investment in Russia.