Russia’s BBB debt rating was affirmed at Standard & Poor’s, which cited low government debt levels balancing risks for the world’s biggest energy exporter from commodity-price swings.
“The stable outlook reflects our assessment of balanced risks to the ratings,” S&P said in a statement today. “Vulnerability of the budget and the economy to fluctuations in key export prices are offset by low government debt levels and the country’s slight net external asset position.”
Russia has had its credit grade on hold since Standard & Poor’s cut it in 2008 and Fitch Ratings did the same the next year after crude prices plunged. Revenue from oil and gas accounts for half the government’s income, leaving the budget at risk from external shocks. Urals crude snapped three days of gains, trading down 0.8 percent at $89.88 a barrel. Russia’s main export blend fell 15 percent in May, the most in two years.
“The confirmation of the rating is a positive for Russia given the very adverse global backdrop and very significant fall in oil prices,” Ivan Tchakarov, Moscow-based chief economist at Renaissance Capital, said by e-mail today.
The government’s $3.5 billion of Eurobonds due 2020 rose, cutting the yield by four basis points, or 0.04 percentage point, to 3.773 percent. The yield on ruble bonds due 2021 dropped two basis points to 8.6 percent and the Micex Index extended gains, adding 1.1 percent to 1,357.95 as of 4:20 p.m. in Moscow.
Russia, which had a 0.8 percent budget surplus last year, is rated BBB at S&P and Fitch, their second-lowest investment grade and thee rungs below an A rating. The country was upgraded to Baa1 at Moody’s Investors Service, its third-lowest investment grade, in July 2008.
The debt rating should be upgraded at least two steps because the country’s weaknesses are overblown compared with those of higher-rated nations, Deputy Finance Minister Sergei Storchak said in a June 22 interview.
“We’ve more than earned that, even with our continued dependence on energy markets,” Storchak said. “Many countries that have higher ratings have their own dependencies, which are no less significant.”
The country’s short-term foreign currency rating was raised to A-2 from A-3 after S&P’s changed its criteria, and doesn’t reflect a change its view of the country’s creditworthiness, according to the statement.
The long-term rating may be downgraded “if government deficits were to deteriorate beyond our expectations,” S&P said in the statement.
Russia’s rating could be upgraded with “policies that would broaden the economic base and improve growth.”
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