Nevertheless, it is partly a reflection of the general deterioration in the business climate and the prevailing political uncertainty in the country - aspects which will be monitored for any possible change rating change.
After Egypt, Russia is the second country where capital flight has been significant this year. Now Russia has a tradition of strong capital flight. Ever since the collapse of the Soviet Union, there have been only a few quarters without a net capital (...)
According to the statement made last December 15th by Ulyukayev Alexei, the Vice President of the Central Bank of Russia, the country has seen a net capital outflow of 74 billion dollars between January and November. This implies an major peak especially considering the last official data from January to September, which showed the net outflow of private capital to be in the order of 49 billion dollars. Even if these figures are significantly higher than those of last year - by 34 billion dollars - they are still well below the levels of 2008 which saw a net outflow of 134 billion dollars.
Preliminary data between January and September, suggest that Russian direct investments abroad have exceeded the FDI inflow by about 17 billion dollars.
"The Russian current account surpluses - a plus for its rating - make it a net exporter of capital. This implies a net outflow of capital without accumulation of foreign reserves" said the Fitch agency which predicts a current account surplus of 82 billion dollars (4.5% of GDP) in 2011, before falling to about 2,3% in 2012 and 1,2% in 2013.
According to the Central Bank of Russia, foreign exchange reserves will remain high, at at least 513 billion dollars until December 2011, as opposed to 480 billion dollars at the end of 2010.
A number of emerging markets have seen capital outflows during the last few months, partly due to the growing aversion to global risk arising from the Eurozone’s sovereign debt. Nevertheless, historically, Russia’s outflow of capital, follows periods of stress. Increased political risk, following the disputed legislative elections this month of December could provoke a new hike in this outflow.
The reaction of the political elite and the world of Russian business to the challenge, launched at Vladimir Putin’s authority, will be carefully scrutinized. If their support becomes fragmented (a scenario which is not envisaged by Fitch), then the political risk and the flow of capital are expected to increase still further.
