RUSSIA’S EXTERNAL ECONOMIC POSITION CONTINUES TO STRENGTHEN.

Despite a 2.9 percent decline in dollar trade turnover (relative to the same period one year ago), Russia’s trade surplus at the end of July stood at $13.1 billion, according to preliminary Goskomstat data released on August 27. This represents a slight increase over the $12.4 billion trade surplus Russia recorded at the end of July, 1996. These figures show that Russia’s external financial position continues to strengthen, a fact that could pose some problems for policy makers later in the year.

Russia’s trade surplus grew despite declines in exports (2 percent) and imports (4.2 percent). The largest drop came in imports from other CIS economies, which fell 16.8 percent to $9.2 billion; Russia’s overall trade with CIS countries was down by some 8.8 percent. Russian trade officials described this drop as the result of "strengthened tariff and non-tariff regulation of imports, in order to protect Russian producers and increase their shares of the national market." However, since much of this drop was due to continued sharp declines in Russia’s trade with Ukraine — according to Ukrainian data, Russo-Ukrainian trade at mid-year was down some 18 percent over mid-1996 levels (see Monitor, August 26) — Russia’s trade with the other CIS countries has probably not declined so substantially. Moreover, exports to other CIS countries at the end of July accounted for only 21 percent of Russia’s total exports, while CIS imports were only 26 percent of Russia’s total imports. These figures demonstrate that Russia has achieved greater success than many other CIS economies in replacing intra- with extra-regional trade.

When combined with growth in foreign direct and portfolio investment, the expanding trade surplus continues to strengthen Russia’s external financial position. According to TACIS’s Russian Economic Trends, gross foreign exchange reserves increased from $14.0 to $23.8 billion during January-July. Should it continue, such growth could ultimately lead to an inflationary expansion in the money supply, or it could cause the ruble to appreciate faster than is desirable. At the moment, however, inflation is not a problem — consumer prices in August actually declined by 0.1 percent — and the growing trade surplus suggests that the ruble can appreciate further without damaging the trade balance. (Russian agencies, August 26, 27, 29) Russia’s strengthening external position also means that the government is unlikely to issue any more Eurobonds this year, beyond the two emissions, worth $3.5 billion, that have been floated. However, Finance Ministry officials do plan to float bonds worth $3.4 billion on international markets next year. (AFI, July 28, 29)

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