Moody's Investors Service raised the outlook on Russia's sovereign ratings to positive, citing evidence of institutional strength and economic and fiscal resilience, MarketsInsider reported on January 26, 2018.
The agency affirmed the ratings at the non-investment grade 'Ba1'. In Moody's assessment, the rating appropriately balances Russia's fiscal strength, somewhat improved economic prospects and effective policy-making against economic challenges and near-term exposure to external events.
The agency noted that the Russian authorities have forged pragmatic monetary, exchange rate and fiscal policy responses in the face of collapsing oil prices and the imposition of international financial sanctions. Further, the medium-term macroeconomic perspective of Russia was better than forecast a year ago when Moody's changed the rating outlook to stable from negative.
The agency expects the recent macro gains to be sustained over the longer term. A gradual easing in monetary policy is likely to support a broader-based economic expansion, including a pickup in the construction sector thanks to higher mortgage lending, the rating agency added.
Nonetheless, challenges remain and Moody's still expects Russia's potential growth to be subdued, at around 1.5 %. Huge capital shortfalls at 3 big banks intensified concerns about the resilience of the banking system.
Moody's observed that the ratings could come under downward pressure if its credit metrics or external position deteriorate affecting its ability to withstand another oil price shock.
Another negative for rating outlook would be the impairment of the lending capacity of the banking system such that banks find it difficult to provide finance to government and companies, especially in case of additional sanctions.