Russia Rating Affirmed at BBB by Fitch on Expected RevivalHenry Meyer
Fitch Ratings affirmed Russia’s credit rating at the second-lowest investment grade, saying economic growth in the second half of the year will probably accelerate after a slowdown.
Fitch kept the ranking at BBB with a stable outlook, according to a statement e-mailed today from London. The decision leaves Russia’s grade on par with South Africa, Spain and Iceland. Standard & Poor’s also rates the country at BBB, while Moody’s Investors Service has it one level higher at Baa1.
“Fitch does not believe recent weakness entails a fundamental re-evaluation of Russia’s growth potential,” the ratings company said in the statement. “We expect activity to pick up in the second half, before reaching 3 percent in 2014-2015.”
The world’s largest energy exporter has had its ranking on hold since S&P cut it in December 2008 and Fitch did the same the next year after crude prices plunged. Russia is seeking to boost the debt grade no less than two steps to A- by 2016 and another level to A by 2020, according to a government plan approved in March.
The ruble has lost 7.7 percent against the dollar this year, the sixth-worst performance among emerging-market currencies tracked by Bloomberg. It traded little changed against the dollar today at 33.100.
Russia’s economy unexpectedly slowed in the second quarter to extend a slide that’s stoking concern that the country may be entering a recession. Gross domestic product expanded 1.2 percent from a year earlier, while the Economy Ministry had projected that output expanded 1.9 percent in the period.
“Slower growth is pressuring the public finances,” Fitch said.
Fitch’s decision may open the way to a potential $5 billion to $7 billion sale of Eurobonds in September or October, according to Tim Ash, chief emerging-markets economist at Standard Bank in London.
“I expect Russia to be one of the first sovereigns to test the market,” he said by e-mail. “It will want to come to market now before we see a broader deterioration in sovereign ratios, and while key commodity prices remain elevated.”
Russia’s budget deficit will amount to 0.8 percent of gross domestic product this year, while the current account will be close to balanced by 2015, Fitch predicted.