Capital outflows from Russia over the first three months of 2014 could reach as much as US$70bn and have spiked sharply higher since president Vladimir Putin dispatched troops to the Crimea.
Reports suggest that investors are withdrawing money at a rapidly increasing rate as the West imposes sanctions, triggering concerns that the country might soon have to impose capital controls to stem the loss.
The deepening economic impact came as Fitch Ratings downgraded Sberbank and four other Russian state banks, citing “increased likelihood of deterioration in the government’s ability to provide support”.
The credit ratings agency (CRA) also placed the subsidiaries of 10 foreign banks on negative watch due to ‘country risk’ and concerns about currency convertibility. These include HSBC Bank (RR), China Construction Bank Russia, Raiffeisenbank, Citibank and Credit Agricole.
Russia’s deputy economy minister, Andrei Klepach, admitted this week that capital outflows in the Q114 were expected to be closer to the top end of a US$65bn-$70bn government estimate, as fears of tighter sanctions hit the economy. The figure would exceed the US$63bn that moved out of Russia during the whole of 2013 and is higher than the US$50bn estimate given by Putin’s economic adviser, Alexei Kudrin, earlier this month.
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