S&P and Fitch raise Russia's rating
S&P Global Ratings has raised its credit ratings for Russia to 'BBB-' from 'BB+' with a stable outlook, the company said in a statement.
"Demonstrated commitment to conservative macroeconomic policies will likely keep Russia's external and fiscal balance sheets strong and, alongside the flexible exchange rate, will enable the economy to absorb shocks that could come from tighter sanctions or weaker commodity prices. Recent failures of a number of private banks have not undermined financial stability, and we see early signs of a lending recovery. We are therefore raising our foreign and local currency sovereign credit ratings on Russia to 'BBB-/A-3' and 'BBB/A-2', respectively," the statement says, TASS reports.
According to the agency, the upgrade reflects the track record of prudent policy response that has allowed the Russian economy to adjust to lower commodity prices and international sanctions. The stable outlook reflects S&P’s view of balanced risks to the ratings. "We may take a positive rating action on Russia if the economic recovery gathers momentum and GDP per capita trend growth reaches rates comparable with countries at similar development levels. Faster-than-expected fiscal consolidation and sustained compliance with the fiscal rule, weakening the impact of volatile commodity prices on public finance, could also support a positive rating action," the rating agency said.
"We could take a negative rating action should geopolitical events result in foreign governments introducing materially tighter sanctions on Russia. We could also take a negative action if we consider there is a risk of a material deterioration in Russia's budgetary trajectory, either due to spending pressures and/or the crystallization of contingent liabilities in the banking sector or state-owned enterprises," the agency said. Similar to the forecast of September 2017, S&P projects that real GDP growth will likely increase to 1.8% in 2018.
In addition, Fitch Ratings has also confirmed Russia’s ratings at ‘BBB-’ with Positive Outlook, the agency said in a statement.
"Fitch Ratings has affirmed Russia's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'BBB-' with Positive Outlook," TASS quoted the statement as saying.
Fitch explained its decision by Russia’s strong sovereign balance sheet, as well as robust external finances and an improved policy framework. All these factors, according to the agency, balance against Russia’s weaker macroeconomic performance, geopolitical tensions and structural weaknesses which include commodity dependence and governance risks.
Fitch noted that the Russian federal budget deficit narrowed to 1.5% of GDP in 2017, less than half the 2016 outturn and well below the 'BBB' median.
The agency expects GDP growth to average 2% in 2018-2019 on the back of reduced uncertainty, easing of monetary policy and stable oil prices. "This compares with a median growth rate of 3.1% for the 'BBB' category," Fitch said in the release.