Fitch Ratings on Friday downgraded Russia's long-term foreign and local currency issuer default ratings (IDR) to BBB- from BBB. Besides, the senior foreign currency and local currency unsecured debt ratings have been affirmed at 'BBB-'. Both categories were pushed down to the lowest investment grade. Fitch’s survey suggests that a further outlook can be changed only for the worse in the current situation.
“Russia's 'BBB-' ratings balance a strong sovereign balance sheet and low sovereign financing needs against structural weaknesses (commodity dependence and governance risks), high growth volatility and geopolitical tensions,” the statement reads.
Fitch forecasts Russia's economy will contract in 2015 by 3.5% amid tumbling oil prices, depreciation of the ruble, and the sanctions imposed by the US and EU. However, analysts expect GDP to grow by 1% in 2016.
Some risks could trigger a further negative rating action such as a new bout of exchange rate volatility, a return to low oil prices, depletion of international reserves, or intensification of sanctions.
Fitch’s sensitivity analysis does not currently anticipate a positive outlook, though experts do not rule out positive developments in Russia. They mention several factors which can result in upgrading the outlook to stable. In particular, a reduction in tensions with the international community will enable the EU to lift the sanctions, so Russian companies will again get access to international capital markets.
According to Russia’s Finance Minister Anton Siluanov, the rating agency is unlikely to revise the sovereign credit rating of Russia.