VEDOMOSTI. The sovereign rating of the Russian Federation could be raised in the near future, Fitch Ratings reported. Last time the rating agency upgraded its rating on the Russian Federation in September 2010: the outlook for the long-term rating was raised from stable to positive and the outlook for the currency rating was affirmed at BBB, Vedomosti wrote. The Russian economy has been recovering from a heavy blow dealt by the global crisis, Ed Parker, head of emerging Europe at Fitch, said at that time. The rating agency believes that “moderating inflation, the shift towards a more flexible exchange rate, substantial repayments of the external debt in the private sector, stabilization of the banking sector and growth of international reserves should reduce the country’s financial vulnerability”.
Moderating inflation and a drop in the budget deficit allows Fitch to talk about a possible upgrade of Russia’s sovereign rating, Fitch wrote in its January report. Based on preliminary data from the Federal Statistics Service, in 2010 consumer prices jumped 8.7% (8.8% in 2009 and 13.3% in 2008). Russia’s budget deficit, according to the estimates by vice PM and Finance Minister Alexey Kudrin, will be 4.1—4.2% of GDP in 2010 (5.9% in 2009).
Russian officials have been waiting for the upgrade of Russia’s ratings since last year (the long-term currency rating assigned by Moody’s (Baa1, stable outlook) and the BBB rating assigned by S&P (stable outlook)). “We moved to the new category of players, as Russia became a more reliable market," Kudrin said last autumn and the Finance Ministry of Russia expects the country’s ratings to be upgraded within a year or two.
Right now ratings have no substantial impact on investors’ confidence, Otkritie Financial Corporation’s Vladimir Tikhomirov noted adding rating agencies tend to react to improvement or deterioration with delays. Assigning an investment grade rating to the Russian Federation became a surprise for the markets (in 2003 Moody’s made a sensational statement acknowledging that in five years after the $40 bln default Russia is able to service its debt quite easily — Vedomosti), Russia has not left the list since then, while minor rating changes will hardly produce a tangible impact on investor sentiment, as those that do business in Russia perfectly know the country’s merits and demerits, Tikhomirov thinks.
For the time being Russia does not plan any large-scale external borrowings (around $7 bln per year under the law on the budget for 2011—2013), which the rating could influence, VTB Capital chief economist Alexey Moiseev noted. Right now rating agencies tend to bring their ratings in line with the reality rather than attempt to foresee development prospects.
