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Moody’s has announced its willingness to lower Russia’s credit rating

Moody's объявило о готовности понизить кредитный рейтинг России

International rating Agency Moody’s expressed willingness to revise downward the credit rating of Russia. This is stated in the press release of the Agency.

On the downgrade from the current Ba1 Moody’s ready to go because of the fall in oil prices and the deterioration of Russia’s balance of payments. Analysts expect raw material prices will remain low in the coming years, forcing the government to look for options for covering the budget deficit.

In its forecasts, Moody’s assumes that an average price for Brent oil will amount to $ 33 per barrel in 2016, $ 38 in 2017 with growth up to 48 dollars by 2019-mu, whereas the government assumes in its forecasts that the average price of 40 dollars per barrel this year and $ 45 in the next. In this situation, the budget deficit will exceed the planned 3 percent of GDP, and the debt burden four years will grow by 12 percent.

Real growth of GDP by 2019, according to analysts, will not exceed 0.4 per cent due to structural problems in the economy and falling real incomes. Considering the budget deficit the Russian government, according to Moody’s, will be forced to devalue the ruble to compensate for the decline in oil prices, or will resort to financial aid from the Central Bank, both of these measures will lead to inflation.

In the revision of the rating analysts will evaluate the ability of the government to mitigate the impact of plummeting oil prices on the creditworthiness of the Russian Federation, as well as plans of the Cabinet in relation to the scale of the task facing them. Decision the Agency intends to adopt within two months.

In December 2015, Moody’s changed the Outlook on government bonds of Russia from “negative” to “stable”, leaving the rating to the speculative level of “Ba1”. In February of last year, the Agency lowered the sovereign rating of Russia to speculative grade, citing as the main reasons for this action, the ongoing crisis in Ukraine and falling oil prices. The Russian Finance Minister Anton Siluanov called the decision of the rating Agency “incredibly negative” and indicated that it is based on very pessimistic forecast.

3 March 2016, the Bank of Russia in its report called vague prospects of the Russian economic recovery. The expectations are that in the first quarter of 2016, Russia’s GDP will drop 0.3 percent, the second will be zero growth in the third — an increase of 0.2 to 0.3 percent (compared to the same quarters of 2015).

On the same day the media reported about the preparation of the Ministry of economic development crisis forecast for 2016-2019. The office of Alex speaker expects that during the period of sanctions and counter-sanctions will remain in force.

According to the latest data of Rosstat, in January 2016, Russia’s GDP decreased by 3.7 percent compared to the same month last year. The index of industrial production fell by 2.7%, retail trade turnover — by 7,3%, the volume of foreign trade at 27.1 per cent.

March 1, Ulyukayev said that the Russian economic growth will resume in the third quarter of 2016.

In February, the big three international rating agencies downgraded its forecasts for the Russian economy. Standard & Poor’s expects that in 2016, GDP will decrease by 1.3 percent (previously talked about the growth to 0.3 percent), Moody’s — 2.5 percent (instead of growing by 0.5-1.5 percent), Fitch — 1 percent (instead of growing by 0.5 percent).

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