Fitch Downgrades Russia’s Credit Rating

FXStreet (Mumbai) - The ratings agency has downgraded Russia’s credit rating to BBB- from BBB last week, just one step above junk or the non-investment field. The outlook remains negative.

The agency has warned that growth may not return until 2017, as the nation's economy has been severely affected by dramatic fall of the ruble along with falling oil prices and Western sanctions.

In an accompanying report Fitch said Russia’s GDP will decrease by 4% in 2015, which is significantly worse than the 1.5% decline the agency had anticipated. The agency also warned that Russian inflation, which hit 11.4% at the end of 2014, would remain in double-digits before dropping to 8.5% next year.

Key Quotes:

"Growth may not return until 2017,"

"Plunging oil prices have exposed the close link between growth and oil price.”

Fitch added, "Commodity dependence is high: energy products account for almost 70% of merchandise exports and 50% of federal government revenue, exposing the public finances and the balance of payments to external shocks."

"The prospects of the [central bank] realizing its end-2015 inflation target of 4.5% now look remote, particularly if the exchange rate falls further, potentially leading to still higher interest rates,"

"it could precipitate a deeper recession and put further strain on public finances, severely limiting the authorities' room for manoeuvre."

Description: Fitch Downgrades Russia’s Credit Rating
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