Russia lost approximately $35.1 billion in capital outflow during first quarter for 2012 and that number continues to grow. The country’s Finance Prime Minister suggests that the number could rise to $40 billion sometime this year and the Central Bank’s forecast expects that number to reach $10.5 billion.
This wasn’t the first time when capital overflow peaked at a very high number. During the financial crisis of 2008, the number rose to $133.7 billion while a year later that number fell down to to $56.1 billion.
The reason for Russia’s high capital outflow probably has something to with the country’s uncertainty with several factors including minimal investment opportunities and a shaky political scene. Now that they have a new government in their office, things may take awhile before it all settles down. The Central Bank’s Deputy Chief Alexey Ulukaev explained to RT that this is what’s preventing investors from contributing, ““But if global investors are happy with the new government, the structure of the government, the people, the agenda for the next several months, it will change the tendency. And instead of capital outflow, we would see capital inflow, in terms of net capital inflow. Fortunately we enjoyed quite a high current account last year, around $100 billion, probably this year it will be a little bit higher. But balanced with capital outflow the situation with liquidity is quite comfortable.”
As Russia’s outflow continues to grow, they must find new ways to continue an inflow to replace that lost money. Ulukaev later states that the Central Bank is targeting their inflation rate at 5 to 6% which is the same as last years. This relatively low rate should help increase investments while everyone waits for the government to settle into office. It seems that every country goes through periods of financial downfalls but it’s important to know that the rough times are only temporary and that a brighter future is just around the corner.
