International rating Agency Fitch Ratings on Friday night have improved the forecast on long-term sovereign rating of Russia from “negative” to “stable”. The rating was affirmed at investment grade BBB-, one notch above “junk”, press release from the Agency. On the same level as the rating are the ratings from Fitch and such countries as Turkey, Romania, Hungary, Indonesia.
Last month, the Agency S&P made the first in several years a positive effect on Russia’s credit rating, changing the Outlook on it from “negative” to “stable”. But the ratings of Russia from S&P and Moody’s Investors Service still remain outside the investment category.
The last time Fitch has revised the rating of Russian securities in April. Then, the Agency has confirmed the investment rating of Russia to investment level BBB-, but with a negative Outlook. Then the Agency analysts pointed out the weakening of the external risks in the previous 12 months, in particular, the threat of sharp reduction of foreign exchange reserves. Among the negative factors for the Russian economy, the Agency called the change in the trade balance, depreciation of the real exchange rate of the ruble and low oil prices.
Fitch notes that macro-financial indicators like current account balance, international investment position, government debt, Russia is superior to its neighbors in the rating category BBB. Although the current account surplus in 2016 will fall to 2.3% of GDP in the coming years it will grow again due to the recovery in oil prices. Capital outflows will slow down due to the more relaxed schedule of foreign debt payments and strengthening confidence in the Russian economy. A medium-term program of fiscal consolidation will reduce the budget deficit to 1.5% of GDP in 2018 compared to 4% in 2016, Fitch expects.
“Russia has implemented a consistent and convincing policy response to the sharp drop in oil prices,” praises the Russian authorities Fitch.
The Agency “care” about achievements of the Russian government’s goals for budget savings and revenue-raising, but expects that higher oil prices will provide the desired consolidation. Fitch forecasts the price of Brent crude in 2017 to $45 a barrel in 2018 — $55 (Russian government budgeted the price of Russian oil to $40 per barrel until the end of 2019).
Net debt of the government, despite increases in borrowing to Finance the budget deficit by the end of 2018 will total only 9.4% of GDP, Fitch expects that the much lower median value for countries with comparable rating category (about 34% of GDP). The economy is recovering after a contraction of 0.5% in 2016 in the next two years will grow by 1.3 and 2%, respectively, expects the rating Agency.
S&P keeps Russia’s credit rating below investment grade from January 2015. September 16, S&P kept the sovereign credit rating of Russia to BB+, which according to scale of rating agencies is considered “junk” or non-investment level. However, the rating Outlook was improved from “negative” to “stable”.
A ‘garbage’ rating in 2015, has assigned the Russian securities, and Moody’s. In April 2016 it has maintained Russia’s rating to non-investment Ba1 with a negative Outlook, despite the expected deterioration of the rating. The decision not to revise it downwards Moody’s experts explained that the Russian economy has shown resilience in the face of falling oil prices.
A few hours before the publication of the decision, Fitch, the representative of the Ministry of economic development, told TASS that the economic indicators give reason to increase the investment rating of Russia. “In our opinion, there are grounds for increasing the rating of Russia. Based on dynamics of the Russian Eurobonds, investors have long appreciated Russia as a country with investment grade rating,” — said the Agency interlocutor.