01 November 2011, 16:32 Business

Capital is carried away by the second wave

The Central Bank increased the forecast of capital outflow to $70 billion

Up to $70 billion of private capital will flow out of Russia this year, the Central Bank predicts. This is twice as much as previously predicted. International reserves will stop growing despite persistently high oil prices. This is a signal of the onset of the “second wave of the crisis,” experts say.

The Central Bank raised its forecast for the net outflow of private capital from Russia in 2011 to $70 billion from $35 billion, which was planned at the beginning of the year. Thus, it may exceed the figure of the crisis year 2009, when $57 billion left Russia. A larger capital outflow was recorded only in 2008 - $129.9 billion.

The main reason for capital flight was “a change in the sentiment of foreign investors”: they withdrew funds from Russian instruments “in the context of increased instability in global financial markets,” according to the updated draft “Main Directions of Monetary Policy.”

Investments in foreign assets have become more profitable “against the backdrop of the unfavorable investment climate in the Russian economy,” the regulator admits.

The Central Bank also lowered its assessment of international reserves. At the end of the year, they will amount to $495 billion instead of the previously planned $515 billion, despite the fact that oil prices continue to remain stably high - at the level of $100 per barrel (at the end of 2010, international reserves amounted to $469.4 billion, as of October 1, 2011 - $493.6 billion). The currency revaluation of reserves due to the weakening of the euro and large-scale interventions by the Bank of Russia to support the ruble exchange rate had an impact, the regulator notes.

From January to September, according to the Central Bank, $49.4 billion left Russia, compared to $14.3 billion for the same period last year.

But back in October, the Central Bank was not going to radically revise its annual forecast. The draft, published on October 3, proposed increasing the net outflow estimate by only $1 billion, to $36 billion.

True, already on October 6, the first deputy chairman of the Central Bank, Alexei Ulyukaev, in an interview with Reuters , named more realistic figures: by the end of the year, the figure will remain at the level of the end of the third quarter, about $50 billion.

The Ministry of Economic Development shared this opinion. There will be no significant capital outflow from Russia in the fourth quarter of this year, Deputy Minister of Economic Development Andrei Klepach said in October . But the forecast could change if major negative news appears from world markets, he warned.

October did not confirm fears; it turned out to be extremely successful for stock markets. European leaders managed to approve new measures to help Greece and a general plan to save the eurozone from the debt crisis.

As a result, the MICEX grew by 11.7%, winning back more than half of the losses incurred since the beginning of 2011. The RTS rose by 20%, compensating for two-thirds of the fall since the beginning of the year. The consolidated European Stoxx Europe 600 added 9.5%, the American Standard & Poor's 500 - 14%, restoring the levels of the beginning of the year.

But the beginning of November threatens to undo all the achievements.

American markets ended Monday with a sharp decline after news of the bankruptcy of the largest brokerage holding MF Global. According to experts, the company lost $6 billion on investments in European securities. At the end of trading, the Dow Jones index fell by 2.26%, NASDAQ - 1.93%.

Tuesday brought new disappointments. The Chinese economy has shown signs of a sharp slowdown. Europe's hopes for salvation from the debt crisis are also crumbling. The Greek authorities have announced their intention to hold a referendum to find out whether citizens are ready for drastic savings in order to write off the national debt and new loans from the IMF and the European Union . The answer “no” means the country defaults. European stock exchanges reacted with a collapse. In less than an hour of trading, the French CAC 40 fell by 3.31%, the British FTSE 100 by 2.44%, and the German DAX by 4.06%. By 15.00, the Russian MICEX fell by almost 3%, the RTS by 4.5%. The ruble also fell sharply. The weighted average exchange rate of the dollar to the ruble for “tomorrow” settlements on the MICEX, at which the official exchange rate of the Central Bank is set, increased by 52.03 kopecks, to 30.64 rubles.

“Concerns about European debt problems and the unstable financial situation in the United States have made themselves felt. China's business activity index, on whose support the world economy is counting, fell to its lowest level in almost three years. In such conditions, capital immediately begins to flow out of developing countries,” states Troika Dialog Investment Company economist Anton Struchenevsky .

However, things are still not so bad in Russia, the expert believes: the low debt burden and the more or less independent monetary policy of the authorities allow us to hope for the best.

“The outflow of capital is a signal that we are sinking deeper into the crisis,” Igor Nikolaev, director of the strategic analysis department at FBK (the organization is included in the list of foreign agents by the Ministry of Justice), disagrees . “This is not happening as quickly as in 2008, when in just a few months the outflow of capital amounted to $130 billion, but the process is underway: investors were the first to feel how the “second wave” was covering Russia. According to Nikolaev, the Central Bank’s assessment is optimistic, and capital outflow could amount to $80–85 billion, and in case of unfavorable external conditions, $100 billion.