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The Flexibility of the Ruble and Low Public Debt. Fitch Upgrades Russia
August 15, 2019 10:49

Russia will be less dependent on oil prices and  able to withstand Western sanctions, which in the long run will remain in force, analysts at the Fitch rating agency say. Fitch raised Russia's rating to the level of 2014.

The international rating agency Fitch upgraded Russia's long-term foreign currency credit rating BBB- to BBB with a stable outlook due to the “reliable and consistent” policy pursued by the Russian government.

"Russia continues to adhere to a robust and consistent policy that will improve macroeconomic stability, reduce the impact of oil price volatility on the economy and support increased resilience to external shocks," the Fitch report says.

The agency also notes that the increased flexibility of the ruble exchange rate and compliance with the budget rule allow the Russian economy to absorb financial, geopolitical and real economy shocks and limit the impact of oil price volatility.

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Fitch predicts that in 2019 Russia will become a “net lender” - the government’s foreign exchange assets, including budget deposits in foreign currencies, will exceed its external debt. At the same time, international reserves will grow to $ 591 billion in 2021, compared to $ 520 billion now, the report said.

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The agency also recalled the second package of US sanctions against Russia in connection with the poisoning of ex-GRU officer Sergei Skripal and his daughter Julia in the UK. Restrictions relate to loans from Russia by international organizations, operations with Russian sovereign debt and the supply of goods and technologies.

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The low level of public debt, fiscal assets and a large amount of foreign exchange reserves will allow Russia to resist these measures, the agency said. At the same time, Fitch assumes that the US and EU sanctions against Russia will remain in force "in the long term." And it is precisely the continuing threat of escalation of sanctions that will affect the possibilities for Russia to attract external financing, investments and prospects for economic growth, experts say.

Fitch downgraded Russia from BBB to BBB- in January 2015 amid falling oil prices, the ruble and sanctions imposed by Western countries against Russia in connection with the annexation of Crimea and the conflict in southeastern Ukraine. In fact, the agency returned to its assessment of the country's credit risk level  of the year 2014 before the downgrade against the backdrop of external restrictions imposed on Russia. S&P estimates the Russian rating at BBB- with a stable outlook. In February 2019, Moody's upgraded Russia's rating to the lowest level of investment level (Baa3) with a stable outlook.

Author: Anna Dorozhkina

Tags: Russian business Russian economy Russian companies   

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