Revision of forecast will not significantly affect financial markets

20 march 2017 | Rossiyskaya Gazeta

In autumn, international rating agencies can raise Russia's ratings to the investment level, which will provide additional support to the ruble and increase the interest of foreign investors in Russian assets. Journalists of the Rossiyskaya Gazeta newspaper asked experts about their opinion on this issue. "The revision of the rating is possible in autumn of this year along with the reduction in the federal budget deficit and simultaneous consolidation of positive tendencies in the economy – first of all, it should reach the growth path over 1.7 % of GDP," stated Daniil Nametkin, an expert of the Analytical Center.

Daniil Nametkin
Daniil Nametkin
Department for Expert Analytics

According to Mr. Nametkin, raising the national currency rating will stimulate the already good demand for federal loan bonds and bonds of the largest state-owned companies, which is caused by the difference between high interest rates in Russia and low ones in the West. This will support the national currency, but will cause further growth of costs in the economy (unprofitable for companies oriented to domestic demand) and certain risks for the budget system, even if oil prices remain at current levels. Too strong ruble is not profitable for the budget.

As for the possible upgrade of the rating on liabilities in foreign currency, so far, it will not affect the inflow of foreign capital, Mr. Nametkin believes. At the present moment, the focus is made on geopolitical risks, while the rhetoric of the US and the EU regarding anti-Russian sanctions has recently become tougher, he explains.

Nevertheless, Asian and Arab investment funds, not limited with sanctions, can increase their limits on investing in Russian assets in case of maintaining positive trends in the Russian economy. In addition, the rating upgrade may give an impetus to accelerating the privatization of a number of state assets. The revision of the forecast itself will not have a significant impact upon the financial markets – it was expected after a similar decision was adopted by Moody's in February. Under its influence, the yield of federal loan bonds has already fallen below 8 percent for the first time since 2014, Mr. Nametkin added.

Source: Rossiyskaya Gazeta