Russian Capital Outflow Forecast Underestimates Risks, Banks Say

Russia’s government is playing down the risks posed by a deteriorating global economy, underestimating the scale of capital flight from the country this year, according to Alfa Bank and UralSib Financial Corp.

“The only realistic way to improve net capital flows is to boost gross capital inflows,” Natalia Orlova and Dmitry Dolgov, analysts at Alfa Bank, Russia’s largest non-state lender, said in an e-mailed research note today, reiterating their forecast for $70 billion. “The current lack of confidence on global markets is an obstacle to this scenario.”

Deputy Economy Minister Andrei Klepach said outflows of net private capital may reach $50 billion in 2012, double the current prediction of $15 billion to $25 billion, Interfax reported yesterday. The total may be “slightly higher or lower” depending on oil prices, Klepach was cited as saying.

The world’s largest energy exporter had a $43.4 billion outflow of capital in the first half, preliminary central bank data show. Gross capital outflows have held steady at about 10 percent of economic output for the past 12 years, according to Alfa Bank.

The International Monetary Fund predicted last week that outflows will probably continue at a “moderating pace,” with strains in the euro area threatening to spur more capital flight and squeeze financing for Russian companies.

While net capital inflows may have reached $3.6 billion in June because of seasonal factors, Russia risks outflows of $75 billion to $80 billion this year because of “economic weakness in Europe and the poor investment climate in Russia,” according to UralSib.

“The $50 billion capital outflow forecast by Klepach for 2012 could be sustained only if the European economy improves dramatically,” Alexei Devyatov and Olga Sterina, analysts a Moscow-based UralSib, said in a note. “If the European economy deteriorates significantly, in which case oil prices could fall substantially, then Russia’s country risks will dramatically increase.”

To contact the reporter on this story: Scott Rose in Moscow at rrose10@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.