SANCTIONS CANNOT STOP RUSSIA – Credit rating continues to improve

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MOSCOW, Russia – Credit rating agency Fitch has kept Russia’s credit rating at BBB – with a positive outlook, citing Russia’s strong balance sheet and progress in strengthening its economic policy framework.

In addition to pointing out a positive outlook for the country, the agency assesses that Russia balances “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 continued to read.

The agency also noted in its statement that this economic policy framework has helped Russia ensure resilience to shocks and preserve macroeconomic and financial stability. This structure remains, the agency describes, despite the increasing likelihood of sanctions and reduced investor interest in 2018.

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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, other agencies released new credit notes for Russia. Moody’s upgraded the country’s rating from Ba1 to Baa3 and shifted its outlook from positive to stable, becoming the third credit rating agency to improve Russia’s rating for investment grade.

The ratings agency projected in August last year that Russia’s GDP growth would reach 1.8 percent in 2018 before slowing to 1.5 percent in 2019. This remains to be seen.

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