S&P affirms junk rating of Russia

The international rating Agency S&P confirmed Russia’s rating at BB+ with a negative Outlook. About it reported in a press-service Agency, reports Reuters. Ratings below BBB are considered “junk”.

“We expect this year, reducing GDP by 1.4%, and in 2017 the economy will return to moderate growth”, — stated in the message. It is noted that limited access to external financing could renew pressure on Russia’s foreign exchange reserves, which can also undermine economic activity in the corporate and banking sectors.

S&P analysts believe that the impact on Russia’s rating has weak political institutions, which hindered the development of competition in the economy. In turn, on economic growth crushes the decrease of purchasing power, which was the result of falling of ruble exchange rate and inflation acceleration. The report also says that sanctions against Russia will remain “on the horizon of our planning.”

S&P expects the average price of Brent crude oil at $40 a barrel this year, $45 per barrel next year and $50 per barrel in 2018, said the Agency, adds Bloomberg.

On Friday, March 18, “Moody’s Interfax”, a subsidiary of international rating Agency Moody’s withdrew all ratings in Russia on a national scale. The reason for this legislative change and potential constraints that may arise in respect of business for assigned national scale ratings in Russia, the company explained.

In early March, Fitch ratings revised the Outlook on Russia’s GDP in 2016: if earlier they believed that Russia’s GDP this year will grow by 0.5%, we now believe that it will decline by 1.5%.

For the first time S&P downgraded Russia to the level of BB+, which is considered below investment grade, in January 2015. The reason for this was the changing policy of the Central Bank, caused the deterioration of the situation in the financial sector, and the worsening Outlook for growth of Russian economy. After S&P rating of Russia to speculative level also downgraded other major rating agencies. At the end of February 2015, Moody’s downgraded the sovereign credit rating of Russia to Ba1 with a negative Outlook, this level is also considered “junk”. Fitch from mid-January 2015 keeps Russia’s rating at BBB-, or on the verge of “junk”.

In early March of 2016, Moody’s put the sovereign credit rating of Russia, located at the level of Ba1, on review for possible reduction. The Finance Ministry stated that the Agency’s decision says about the necessity of adapting the budgetary system to the fall in oil prices.