Russia’s shrinking surplus, Israel’s political risks

The focus in the media this week on Russia’s record current account surplus in 2022 misses the huge deterioration in that surplus at the end of the year. We think the balance of payments will be squeezed further in 2023, raising the chances of a sharp external adjustment. Elsewhere, the proposed reforms to the judiciary by Israel's new government has raised concerns about threats to the country’s institutions and long-run growth potential. The potential shift to a looser fiscal policy stance also means that inflationary pressure could be more persistent.