Global Crisis Hits Russia but Sovereign Rating Seen Stable

Russia’s financial markets have been hit hard in the current global economic crisis and its balance sheet could suffer as oil prices decline, but Fitch Ratings said it expects the country’s sovereign debt rating to remain stable.

Russia’s equity markets and credit default swap spreads have reflected greater financial stress than most other emerging markets, Fitch noted.

The world’s second-largest oil exporter and world’s largest gas exporter faces a liquidity squeeze as a result of capital outflows, falling oil prices and declining international sentiment toward Russia over its war with neighboring Georgia.

Fitch views the sizeable external debt burden and payment schedule of the Russian private sector as a significant financial, economic and rating weakness, particularly in current global market conditions.

But Fitch’s BBB+ Long-term Foreign and Local Currency Debt rating for Russia, which has been in place since 2006, has incorporated these risks to some degree.

While Fitch now expects some deterioration in Russia’s sovereign balance sheet, the agency’s central case is that the deterioration will be contained within tolerances for the sovereign’s ‘BBB+’ rating.

Fitch said the current stable outlook for Russia could change if there’s a further steep decline in oil prices, large net capital outflows, deepening banking problems, or the need for a massive bailout of the private sector.

For details, see “Russia: Global Shocks Expose Weaknesses”

Comments

[notsosmart:]

you cant believe the russians & you can believe fitch even less.

2008 Oct 24 11:57 AM