Credit rating - an assessment of the creditworthiness of an enterprise or a country, which is based on the previous and current financial indicators, as well as the debt obligations assumed.
Almost every market participant has its own credit rating system. However, in the case of government ratings on the bond market, ratings of 3 agencies are used - Standard & Poors, Moody’s and Fitch. The main purpose of credit ratings of states is to provide information to investors about the likelihood of payment of financial obligations.
Ratings are identified by letter designations (e.g. AAA, B, CC). Bond ratings below 'BBB-' are considered investment hazard (called junk bonds).
Credit rating of Russia according to Standard & Poor's
At the end of 2013, S&P affirmed Russia's long-term sovereign ratings at 'BBB' in foreign currency and 'BBB +' in local currency. The outlook on the ratings is “stable”. According to the Standard & Poor's methodology, this rating is assigned to debt obligations of average quality with stable interest payments (the "+" sign denotes the country's relative position in this group, higher than "BBB"). Also, the agency has left unchanged the short-term ratings of Russia in foreign and national currency at the level "A-2" (high degree of creditworthiness).
The confirmation of the Russian ratings was based on strong fiscal and foreign economic indicators, as well as a high revenues associated with the export of raw materials. At the same time, the indicators are negatively affected by the high dependence of the budget on the supply of hydrocarbons, as well as the weakness of political and economic institutions. This has a deterrent effect on the investment and business climate in the country.
Credit rating of Russia by Moody's
Moody's estimates Russia's rating at 'Baa1' with a stable outlook. According to Moody's classification, this rating means an acceptable level of risk when buying bonds of the country, it is second only to the “A” level.
According to Moody's, the credit rating of the Russian Federation may decrease due to the complication of relations with Ukraine, which may lead to an increase in capital outflow and a decrease in GDP.
According to the agency's forecasts, the Sochi Olympics will not affect the credit rating of the Russian Federation, since it will not be able to provide macroeconomic support. It is also noted that the high cost of construction of the Olympic facilities and other negative factors have reduced the reputation benefits from the Olympics.
Credit rating of Russia by Fitch
In January 2014, Fitch agency affirmed Russia's rating at 'BBB', with a stable outlook.
In addition to Russia, countries such as Bahrain, Brazil, Colombia, Iceland, Panama, South Africa and Spain have been rated BBB by Fitch.
This rating indicates good credit quality, credit risk is viewed as low, but changes in market conditions may have a more negative impact than countries rated AAA, AA or A.
According to the agency, a flexible ruble exchange rate will have a positive impact on the Russian economy, which will compensate for a possible decline in oil revenues. The rating is supported by a low level of public debt (11% of GDP), as well as a small budget deficit (below 1% of GDP).
At the same time, the predicted decline in oil prices, high budget dependence on oil supplies, as well as the absence of internal structural reforms may have a negative impact.
