From Bloomberg:
Fitch Ratings will probably upgrade Russia's credit score this year if the economy continues to expand and the budget deficit and inflation remain in check. Bonds gained the most in two weeks.
"I think we will see all these trends and if they are in line with our positive expectations, then it is highly probable that there will be an upgrade this year," Vladimir Redkin, who oversees Russia's rating at Fitch, said in an interview in Moscow.
Fitch last changed its score for Russia in February 2009, cutting it one step to BBB, the second-lowest investment grade. It put Russia on "watch positive," indicating optimism, last September and will probably issue a new rating this September, Redkin said. Standard & Poor's ranks Russia the same as Fitch, while Moody's Investors Service rates the country one level higher at Baa1, the same as Ireland.
The country's sovereign dollar bonds maturing in 2020 climbed the most in two weeks, pushing the yield down 7 basis points to 5.039 percent. Dollar debt due 2015 rose the most since Jan. 4, lowering the yield 9 basis points to 3.600 percent. The ruble was little changed versus the dollar at 29.9873 by 1:15 p.m. in Moscow.
Russia in 2009 ran its first budget deficit in a decade amid the global recession and had one again last year, when it reached 3.9 percent of gross domestic product. Finance Minister Alexei Kudrin has said the shortfall may shrink to as little as 3 percent of GDP this year, when the budget is based on an average oil price of $75 a barrel. Urals, Russia's main export blend of crude, closed yesterday at $92.65.
Euro Turmoil
In contrast to Russia, there is a continuing risk that euro-region nations will have their credit ratings downgraded because of episodes of market turmoil, David Riley, head of sovereign ratings at Fitch in London said in the slides of a presentation due to be given today.
Russia's rating is at a "turning point," with upgrades likely within six months, Commerzbank AG said this week. Higher oil prices may allow the government this year to balance the budget and increase its stockpile of foreign currency by about $50 billion from $477.5 billion, said Barbara Nestor, an emerging-market specialist at the Frankfurt-based bank.
"We expect them to narrow the deficit," Redkin said. "What is important is the downward trend."
The budget gap narrowed to 3.9 percent of GDP last year from 5.9 percent in 2009 when the economy shrank 7.9 percent. The government forecasts the shortfall will decline to 3.6 percent this year, 3.1 percent in 2012, and 2.9 percent in 2013.
Economic Expansion
The economy of the world's biggest energy exporter expanded 3.7 percent in the first 11 months of last year and probably met the full-year target of 3.8 percent growth, Economy Minister Elvira Nabiullina said last month. GDP growth is set to reach an annual 4.2 percent this year, according to government forecasts.
"If economic growth continues and exceeds growth in 2010, if authorities manage to curb inflation, then they are definitely factors to changing the outlook and upgrading Russia," Redkin said.
The risk of accelerating inflation is higher than that of slowing economic growth, Bank Rossii First Deputy Chairman Alexei Ulyukayev said in London yesterday.
"It will be very, very difficult" to reach the central bank's "ambitious" 6 percent to 7 percent inflation target, he said.
Privatization Plan
Another factor supporting an upgrade is the government's three-year plan to raise at least 1 trillion rubles ($33 billion) selling assets, Redkin said. "It means revenue into the budget and more competitiveness in the market," he said.
The government plans to sell stakes in Russia's biggest companies, including OAO Sberbank and VTB Group, the nation's largest lenders, shipper OAO Sovcomflot, and OAO Novorossiysk Commercial Sea Port. The country's last major asset sale was in 2007, when VTB raised $8 billion in the biggest initial public offering that year.
To contact the reporters on this story: Emma O’Brien in Moscow at
eobrien6@bloomberg.net; Maria Levitov in London at
mlevitov@bloomberg.net.
To contact the editor responsible for this story: Gavin Serkin at
gserkin@bloomberg.net.
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