UPDATE 4: Moody’s raises Russia’s outlook to Positive over resilience signs

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MOSCOW/DAVOS, Jan 26 (PRIME) -- Global rating agency Moody’s has changed the outlook on Russia’s Ba1 long-term issuer and senior unsecured debt ratings to Positive from Stable and affirmed its long-term ratings at Ba1 and its short term rating at Not Prime (NP), the agency said on Friday.

“The change in the outlook on Russia's Ba1 ratings was driven by … growing evidence of institutional strength. Russia's macroeconomic framework coped well with the oil price shock and with the impact of sanctions imposed to date, and enhancements have been made to the government's rule-based fiscal framework,” the agency said.

“Increased evidence of economic and fiscal resiliency that has reduced Russia's vulnerability to further external shocks arising from geopolitical tensions or from renewed declines in oil prices.”

REACTIONS AND COMMENTS

Finance Minister Anton Siluanov said he hoped that the domestic economic stability will force international rating agencies to improve the state’s ratings and rating outlooks.

“It has taken only a year to improve Russia’s rating outlook from Negative to Positive. Today all the “Big Three” companies agree on a Positive outlook for our country. I hope that macroeconomic stability on the back of a moderate budget policy, a floating ruble rate and inflation targeting will force the agencies to revise not only rating outlooks, but the ratings themselves. There are all necessary conditions for that,” he said.

The official added that he is happy that Moody’s sees the budget rule to be among the main reasons for a better outlook due to its influence on Russia’s lower dependence on external shocks.

Economic Development Minister Maxim Oreshkin told channel Rossiya 24 he expects that the Big Three international rating agencies, Fitch, Moody’s and S&P, will assign Russia an investment-grade rating in 2018.

“I think that in 2018, we will see the rating of Russia by all three rating agencies reaching the investment level,” Oreshkin said.

CEO of the Russian Direct Investment Fund (RDIF) Kirill Dmitriev said that the country’s economy deserves a higher rating and that Moody’s rating upgrade testifies to a rising investor interest.

“A positive outlook reflects Russia’s economic recovery, the macroeconomic stability and a rising interest of investors to local assets. The oil price stabilization stemming from an OPEC+ deal and a reasonable monetary policy to stabilize inflation were among other important factors,” he said.

“We believe that Russia’s economy deserves not only an outlook revision, but an upgrade of the rating, too.”

VTB Bank CEO Andrei Kostin said he sees every reason for further positive rating decisions.

“That is right, it is only the beginning!” he said.

The bank’s CFO Herbert Moos told PRIME that the decision is expectable.

“I think that it could be expected as the economy developed positively last year. I think that it is only a reflection of what happened last year and an outlook for the future, maybe,” he said.

Gazprombank said in a research note that Russia’s rating revision may result in upgrades of ratings of Lukoil, Novatek, Norilsk Nickel, Novolipetsk Steel (NLMK), Severstal, PhosAgro and Gazprom on Friday or in the few next days. Revision of Rosneft and ALROSA ratings is also possible.

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