MOSCOW, October 15. /Corr. Nikita Zharkov/. International rating agencies S&P and Fitch will remain at the same levels of credit ratings of Russia due to the stabilization of the situation in the economy, interviewed experts.
To publish updated ratings of Russian sovereign credit rating agencies S&P and Fitch is expected on October 16. Experts unanimously negative ratings changes will not be as positive adjustments to the forecasts are possible, but still unlikely.
Previous actions by S&P and Fitch Russia’s confirmation of the ratings of the country. So, on 17 April, the S&P Agency confirmed a rating of Russia to speculative level “BB+”, and July 3, Fitch preserved the level of Russian investment rating “BBB-“. Both agencies maintain the negative Outlook on Russia.
The situation in the Russian macro economy since the previous ratings from S&P and Fitch did not undergo negative changes, pay attention to the economists. On the contrary, the Russian economy is now stabilizing.
“We don’t anticipate any changes. Russia is doing what he promised: there is no intervention, the ruble in free float, fiscal policy is very balanced. So unambiguous triggers for review,” says chief economist for Russia and CIS Bank of America Merrill Lynch Vladimir Osakovsky. According to him, many negative factors are already reflected in the speculative rating Agency S&P, but an investment grade rating from Fitch meets risks from oil prices and worsening GDP forecasts.
However, earlier in October, the Minister of economic development of Russia Alexei Ulyukayev has declared that does not expect the revision of the Russian rating by Fitch downward. In addition, in September, senior Director of Fitch ratings Charles Seville said that the Agency will maintain the investment rating of the Russian Federation.
“The economic dynamics of the last few months is rather an indication of stabilization. At the moment it is hardly possible to speak about any significant changes for the worse or better. And the worsening of the GDP forecasts is not radical in nature and qualitatively the picture does not change,” – says Professor of the Department of world economy at the diplomatic Academy of the MFA of Russia Yaroslav Lissovolik.
Forecasts are falling faster than GDP
Perhaps the single most significant change in the macroeconomic picture from April-July to date were multiple revisions of forecasts on the dynamics of Russia’s GDP in 2015-2016. In particular, in may the Ministry of economic development predicted the GDP decrease by 2.8% in 2015 and an increase of 2.3% in 2016. The current forecast of the Ministry assumes GDP decline by 3.9% this year and growth of just 0.7% next year.
In addition, the IMF forecasts have also deteriorated over the past few months. Fresh the October forecast of the Fund involves the fall of Russia’s GDP in 2015 by 3.8% against a rise of 3.4% in July. And in 2016 the IMF is waiting for the GDP at 0.6% against growth of 0.2% in the July forecast.
According to Rosstat, Russia’s GDP in physical terms in the first quarter of 2015 decreased by 2.2% in the second – by 4.6%. Data for the third quarter has not been published yet.
“Adjustment of GDP forecasts has not fundamentally changed the picture for the rating agencies. Moreover, the Agency expected that the recession will deepen. We see no serious reasons to revise the ratings” – said a senior strategist at Sberbank CIB Vladimir Pantyushin. According to him, for anybody not a secret that Russia is currently going through a recession. “The question of when it will be out. In the beginning of next year, at the end of next year or it will be in 2017”, – he said.
Today, S&P changed the forecast for the decline in GDP in 2015 to 3.6% from 2.6% and lowered its forecast for growth in 2016 to 0.3% from 1.9% due to expectations of a more prolonged period of weak domestic demand.
However, forecasts are only opinions and not facts, draws the attention of the Director for analysis of financial markets and macroeconomics UK “Alfa-Capital” Vladimir Bragin. “Yes, we have a crisis. Yes, the forecasts in the crisis will worsen, but these are only predictions, and not a statement of the current situation. If we talk about the sovereign rating, in General, the Russian government and Russian budget gangbusters survived the decline in oil prices”, – he said.
According to him, no serious internal adverse events that may affect the deterioration of the competitiveness of the Russian economy, did not happen, the foreign exchange reserves did not decrease, the size of the external debt was reduced, the budget deficit is within acceptable limits and the size of the national debt remains at a comfortable level.
The low level of public debt has become one of the main arguments S&P in favor of maintaining the rating in April. In this case the Agency experts predict that in 2015-2018 Russia will maintain a moderate level of public debt.
Little hope for stabilisation of the outlooks on the ratings
Russia is on very good level in many macroeconomic indicators, said the head of debt markets “URALSIB capital” Dmitry Dudkin. “Even global background Russia is not as bad looking as she looked at the time of the imposition of sanctions active phase of the Ukrainian crisis. Therefore did not expect the situation to deteriorate. Rather more correct to expect a gradual stabilisation of the outlooks on the ratings and their conversion to “stable” level with “negative”, – he explained.
In June, credit-S&P analyst Trevor Cullinan said that the Agency could upgrade the rating Outlook of Russia to “stable” from “negative” in the case of improving the prospects of economic growth and financial stability.
For several months most of the observed phenomena prove the fact that the situation in the economy develops better than expected, says Dmitry Dudkin from “URALSIB capital”.
The evaluation of Professor Yaroslav Lisovolik, one of the positive factors is targeting a lower budget deficit, and Mr Pantyushin from Sberbank CIB called the positive stabilization of international reserves, which in July ranging from $360-370 billion.
“Overall in the economy there are no systemic threats. External debt is reduced. Russia is in a good position from the standpoint of debt load, from the point of view of the trade surplus,” says Dmitry Dudkin.
In September the Deputy Minister of Finance Maxim Oreshkin noted that since the second half of last year the external debt is repaid rapidly. So, in the 3rd quarter of 2015, the external debt of the Russian Federation in annual terms decreased by 23.4% to $521,61 billion.
Another positive change was the inflow of capital following the results of the 3rd quarter, which the Bank of Russia registered for the first time in 5 years. It amounted to $5.3 billion while the previous year was recorded outflows of $7.4 billion
Speaking at the forum VTB “Russia calls!” the President of Russia Vladimir Putin has declared that the crisis peak is reached, and the Russian economy have adapted to new conditions. According to him, the inflow of capital in the third quarter of 2015 suggests that the market reacts to what is happening in the economy.
Indeed, the situation on the Russian debt market in recent times indicates that investors do not fear the reduction in credit ratings of the Russian Federation, but rather massively buying up Russian bonds on the domestic market. “Despite the fears that were a year ago, despite low oil prices, the solvency of the Russian Federation is saved, the demand for Russian risk,” said Vladimir Bragin from the UK “Alfa Capital”.
Demand for OFZ in most of the auctions of the Russian Ministry of Finance for several months is oversubscribed by 2-4 times. The placement of OFZ inflation by 20.2 billion rubles this week it is an excessive demand that has exceeded the volume of supply in 4.6 times.
Further evidence of interest in Russian securities – statements of the largest U.S. pension Fund CalPERS, with assets under management of $295 billion, who yesterday expressed his intention to strengthen its position in Russian bonds. Russian OFZ linked to inflation amount to about 5% ($250 million) of the total sovereign debt portfolio Fund, the amount of which is equal to $5 billion.
However, it is too early to talk about raising even the outlooks on the ratings, warns Vladimir Osakovsky from BofA Merrill Lynch. “Yet large risks remain from foreign markets. There are certain actual risks from the economic growth,” he explained. “Now the prerequisites for improving forecasts, no,” agrees Yaroslav Lissovolik.