NEW YORK, New York - Russia got some good news on Friday as Moody's announced it was upgrading the country's sovereign debt ratings.
Russia's government of issuer and unsecured senior debt ratings has been lifted from Ba1 to Baa3 and its other short-term rating to Prime-3 (P-3) from Not Prime (NP).
In addition, the rating agency's outlook on its issuer rating has been changed to stable from positive.
"The upgrade of Russia's ratings reflects the positive impact of policies enacted in recent years to strengthen Russia's already robust public finance and external metrics and reduce the country's vulnerability to external shocks including fresh sanctions. The stable outlook reflects evenly balanced upside and downside credit risks," Moody's said in a statement published on Friday.
In a related decision, Moody's has raised Russia's country ceilings on foreign currency debt to Baa2/P-2 from Baa3/P-3, its country ceilings on foreign currency bank deposits to Baa3/P-3 from Ba2/NP and its country ceilings for local currency debt and deposits to Baa1 from Baa2. "Generally speaking, each of these ceilings indicates the highest possible ratings level that can be assigned to the relevant liabilities," the Moody's statement said.
Moody's noted Russia's vulnerability to external shocks, low oil prices and interrnational sanctions, more of which it is anticipating.
"However, in Moody's view, the government's capacity to withstand external shocks including further sanctions has improved since the sovereign rating was downgraded to Ba1 in 2015. The ongoing reduction in external vulnerability is reflected in the sovereign's still-strong balance sheet and increasingly robust external position, both of which Moody's expects to be sustained. These strengths are attributable in large part to the authorities' policy response to the terms of trade and sanctions shocks that have negatively impacted the economy since 2014. More recently, the adoption of pension reforms shifts labor force trends in a positive direction and will support fiscal strength over the longer term," the ratings agency statement said.
"Russia's external finances are more robust than a year ago and in some respects stronger than in 2014 when the external shocks initially struck the country. The central bank's foreign exchange reserves cover 80% of external debt (including direct investment), compared to 57% of external debt in June 2014. Even though capital outflows including net external debt payments rose last year, they were more than covered by the current account surplus, which widened to $115 billion or 7% of GDP, significantly strengthened by higher oil prices and a strong performance from non-oil exports."