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Fitch revises Russia’s outlook to stable, affirms its IDR’s at BBB

January 16, 2012, 20:14 UTC+3

The Fitch international ratings agency has affirmed Russia’s issuer default rating (IDR) at BBB

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MOSCOW, January 16 (Itar-Tass) —— The Fitch international ratings agency has affirmed Russia’s issuer default rating (IDR) at BBB, while revising the country’s long-term foreign and local currency IDR outlook to stable from positive, the agency said in a statement Monday.

The political uncertainty in Russia has risen and the global economic outlook has worsened since Fitch last affirmed the country’s rating in September 2011.

Moreover, the agency said that political risk, reflected by poor governance indicators, is a long-standing weakness compared with most other BBB-rated countries, and recent events have highlighted the limitations and risks associated with Russia’s political model.

According to the agency, higher-than-expected oil prices stimulated public finances to outperform the budget in 2011.

The federal budget recorded a surplus of 0.8 percent of the country’s Gross Domestic Product (GDP), as compared to a deficit of 2.3 percent of GDP under the revised on June 2011 budget plans, the agency wrote.

In 2012, under a Brent oil price of close to 100 U.S. dollars per barrel, Russia’s federal budget is projected to record a deficit of 2.0 percent of GDP. This assumes some slippage from the 1.5 percent of the GDP target in the 2012 budget approved by the Russian president in December 2011, the agency reported.

Furthermore, the agency said that Russia’s net external creditor position, at both the national and sovereign level, forms a buffer to external shocks and is a major support to the rating. Sovereign net foreign assets reached 486 billion U.S. dollars, or 27 percent of GDP, at the end of 2011, the fifth-strongest in the BBB category, the agency wrote. The private sector owes 300 billion U.S. dollars, or 26 percent of GDP, and is a net external debtor, but short-term external debt is lower than in 2008, and better covered by reserves, the agency wrote.

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