Moody’s upgrades its outlook for Russia’s economic development to stable
The international credit rating agency Moody’s has upgraded its outlook for Russia’s sovereign rating from negative to stable. The two other major global credit rating agencies, Standard & Poor’s (S & P) and Fitch, did so last autumn. TASS explains what this means.
What is Russia’s sovereign rating?
Primarily, it is an assessment of the country’s credit risk — that is, the likelihood that a country will be unable to meet its liabilities and will default. In addition, the ratings rank countries by economic stability. The change in the outlook from negative to stable means that, in the agency’s view, the situation will remain constant – or will improve.
Why are these ratings relevant?
They are an important indicator for investors of whether it is worth investing in business in a particular country. In addition, the rating is an expert assessment of a country’s economic situation: it is a kind of outsider’s view.
Why has the outlook for Russia’s economic development improved?
We can quote the agency itself: "The main driver for changing the outlook on Russia’s Ba1 government bond rating to stable from negative is the government's enactment of a medium-term fiscal consolidation strategy that is expected both to lower the government's dependence on oil and gas revenues and to permit the gradual replenishment of its savings buffers. In addition, the Russian economy is now recovering after a nearly two-year-long recession. Moody’s believes that, when combined, those two factors have eased [Russia's] downside risks.” In addition, the agency regards the control of inflation as a positive factor.
How do other credit rating agencies rate the Russian economy?
The same as Moody’s: stable. Standard & Poor’s gave the country this rating in September 2016, and Fitch did so in October.
So everything about Russia’s economy is just great then?
Sadly, not everything yet. The sovereign rating also includes an assessment of whether or not it is worth investing in a country. At present, only Fitch recommends investing in Russia (they give our country a rating of BBB- [“lower-medium investment grade”]). S & P and Moody’s give ratings of BB+ and Ba1 (speculative grade) respectively. In fact, Russia’s Minister of Economic Development, Maxim Oreshkin has stated that there is a strong chance that Russia’s rating will be upgraded to investment-grade level by the end of this year.