Fitch Ratings said it maintained Russia’s issuer default credit rating at BBB- with a positive outlook, citing the country’s strong balance sheet and progress in strengthening its economic policy framework.
“Fitch Ratings has affirmed Russia’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at ‘BBB-‘ with a Positive Outlook,” the agency said in a statement.
“Russia’s ratings balance a very strong sovereign balance sheet, robust external finances and a credible macroeconomic policy framework against weaker growth prospects than peers, high commodity dependence, weak governance standards and geopolitical tensions. 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,” the statement added.
The agency also noted that this economic policy framework helped Russia ensure resilience to shocks and preserve macroeconomic and financial stability despite the increasing likelihood of sanctions and lowering interest on the part of investors last year.
The agency continued by suggesting that this year, average inflation will go up to 5.3 percent from the record low of 2.9 percent in 2018 due to the increase in the Value Added Tax (VAT) rate, as well as the recent weakening of the ruble and higher inflation expectations.
Nevertheless, Fitch forecast inflation to lower back to the Central Bank’s 4 percent target by 2020 “in the absence of persistent effects from the VAT increase, negative supply shocks and further weakening of the rouble.”
“Fitch expects growth to slow to 1.5% in 2019 reflecting the impact of the VAT rate increase on consumption and weaker investment (especially given a higher base effect from 2018). We then expect growth to accelerate modestly to 1.9% in 2020, below the expected 3.2% for the ‘BBB’ median, supported by recovering private consumption and faster execution of government priority programmes,” the agency argued.
Last week, Moody’s upgraded Russia’s issuer and unsecured senior debt ratings from Ba1 to Baa3 and changed its outlook from positive to stable, becoming the third ‘Big Three’ credit rating agency improving Russia’s rating to investment-grade.Daesh Militants Kidnapped 8 Civilians in Iraq’s Western Anbar Province – Reports