Upgrading of the Sovereign Rating Forecast by the Moody’s was Expected

According to the Moody’s, the Russian economy “have managed the oil shocks and after-effects of the sanction pressure”.

In our view, the rating agency’s optimism is justified and based on the up-to-date macroeconomic data pointing to positive – though not quite sustainable -- trends being formed in the Russian economy. According to the Rosstat’s data, growth of seasonally adjusted GDP in January-September 2017 amounted to 1.9% as compared to the same period of the previous year (a 0.8% decrease in January-September 2016). Retail trade volumes grew at accelerated rates, too (1% in January-November 2017 as compared to the relevant period of the previous year against a decrease of 4.5% in the same period of 2016). In 2017 growth in consumer prices slowed down to the all-time low of 2.5% December on December.

At the same time, with the rating of government bonds both in roubles and foreign currency being at the level of B1 and the ceiling of the country rating of deposits in foreign currency, at the level of Ba2/NP, Russia remains vulnerable not only to short-term risks, but also long-term external risks, including possible toughening of sanctions and high volatility of prices of Russian exports’ main commodities.

Also, it is worth mentioning that in September 2017 the Fitch, an international rating agency revised upward Russia’s rating forecast from “stable” to “positive”, which fact, in our opinion, is evidence of the Russian economic situation getting better. However, the upgrade of Russia’s ratings is feasible only in case of further improvement of the Russian economic situation.

Anna Kiutsevskaya, Researcher of the Monetary Policy Department