Higher Oil Prices Lead Standard & Poor’s and Fitch To Raise Russia’s Rating

With crude oil prices having risen for over a year Standard & Poor’s Global Ratings agency has raised Russia’s long-term and short-term sovereign credit rating to BBB-/A-3. Rating peer Fitch reaffirmed Russia’s investment grade level with a positive outlook.  

With crude oil prices having risen for over a year Standard & Poor’s Global Ratings agency has raised Russia’s long-term and short-term sovereign credit rating to BBB-/A-3. Rating peer Fitch reaffirmed Russia’s investment grade level with a positive outlook.

Russian FriendsFitch and S&P Like What They See in Russia

Standard & Poor’s Russian Global Ratings were at speculative BB+ before raising them up a notch to investment grade BBB-. Notably S&P also lowered the outlook on the Russian economy from positive to stable. By comparison the Fitch Ratings agency increased its outlook to positive while reaffirming Russia’ investment grade.

S&P said in a statement

“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,” .

Fitch said, also via statement

“The Positive Outlook reflects continued progress in strengthening the economic policy framework underpinned by a more flexible exchange rate, a strong commitment to inflation-targeting and a prudent fiscal strategy, This policy mix is contributing to improved macroeconomic stability and, together with robust external and fiscal balance sheets, increases the economy’s resilience to shocks.” 

“Fitch forecasts that Russia will record a fiscal deficit of 0.6% in 2018 (outperforming the budgeted 1.3% deficit), reflecting higher-than-budgeted oil prices, continued non-oil and gas revenue growth and expenditure restraint.” Russia’s general government debt ratio declined to 15.5% of GDP in 2017, among the lowest in the BBB investment grade category,  Russia’s external balance sheet has strengthened, with growing capital inflows. “International reserves rose to $433 billion in 2017, reflecting capital inflows, higher-than-budgeted oil prices leading to a higher current account surplus and increased gold holdings,”

Russia’s Economic Development Minister Maksim Oreshkin on the moves;

“This opens a path for increased investment lending and expands the possibility of financing the infrastructure debt.” Oreshkin also said that the floating exchange rate and careful targeting of inflation “significantly reduced the dependence of the Russian economy on oil prices.” according to TASS.

Russian Finance Minister Anton Siluanov responded;

Siluanov said the rating move was a “logical and expected” step, emphasizing that Russia’s economy has “adapted very quickly to new conditions” and “shows positive growth rates. Given the forecasts of socio-economic development, budgetary design [and] balanced fiscal policy, Russia has long deserved an investment rating. Market investors have previously objectively assessed the observed economic recovery, and Russia’s debt obligations have long been quoted at an investment level.”

The moves come just a week after Russia’s Finance Ministry commented on the sidelines of the Russian Investment Forum in Sochi last week. that they hoped US-based Fitch and S&P will objectively assess the Russian economy.

“I would like the rating agencies to objectively look at the situation. One can see that Russia overcame the difficult times, that we are conducting a very effective monetary and credit policy, that the country is back in economic growth, [which is] slightly less than we planned, but that is growth, anyway. We do not have any problems with servicing and repayment of debt,” Siluanov told reporters

Was this straight out manipluation or was the agencies reports coming anyway?

Source: TASS

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