Page 10 - bne_Magazine_March_2018

10 I Companies & Markets bne March 2018
Russia gets back to investment
grade rating
Ben Aris in Berlin
International ratings agency Standard & Poor’s (S&P) upgraded Russia’s sovereign rating to 'BBB-' from 'BB+' with a stable outlook on February 24, returning Russia
to the sought after “investment grade” rating category on
the back of the end of a two-year long recession and several pleasant surprises that suggest the economy is growing faster than expected.
The S&P upgrade gives Russia a hat trick of investment grade ratings. Rival agency Fitch chose the same day to confirm Russia’s ratings at BBB- with a positive outlook, the agency said in a statement. The third major international ratings agency Moody's Investors Service rates Russia at Ba1, an investment grade, and upgraded the country’s outlook to positive from stable on January 25.
Among the good signs were Russia's solid fiscal performance, real progress in cleaning up the banking sector, surprisingly strong industrial production numbers, another set of strong PMI index results and an unexpected pick up in corporate borrowing. The official forecasts for growth and the federal budget deficit this year are a modest 1.5% and a painful -3.4% GDP respectively, but both those estimates are already
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looking way too pessimistic; many analysts are predicting
at least 2.5% growth in 2018 and even Minister of Economy Maxim Oreshkin said during the Gaidar Forum in Moscow in January there is a good chance the federal budget will be in surplus by December.
“The upgrade reflects the track record of prudent policy responses that has allowed the Russian economy to adjust to lower commodity prices and international sanctions. [The government] demonstrated commitment to fiscal restraint and an enhanced fiscal policy framework have reduced medium-term risks of fiscal slippage. Finally, despite the ongoing clean-up of the banking system, the Central Bank of Russia (CBR) measures have preserved fiscal stability. Credit to the private sector has started to recover, which we view
as a sign of improved monetary transmission,” the ratings agency said in a press release.
Investment grade opens doors to new money
Market players expect demand for Russian state bonds to increase as major international funds require two investment grades as a minimum to invest in a country’s financial instruments.