Fitch upgrades Russia's outlook to Positive.

By bne IntelliNews September 9, 2010
Fitch Ratings affirmed Russia's long term Issuer Default Rating (IDR) at BBB, while upgrading the outlook on the rating from Stable to Positive. Agency attributed the upgrade to expectation of declining financial vulnerability as a result of decreasing inflation, flexible currency exchange rates, substantial decrease of foreign debt of the private sector, stabilisation of the banking sector and growing Fx/gold reserves. Fitch expects Russia's GDP to increase by 4.3% this year and by 4% in 2011 and 2012. Agency believes that economic recovery is balanced and is supported by growing oil prices, disposable income growth, stabilisation of financial confidence and capital flows. Fitch believes that budget deficit is going to amount to 4.7% of GDP this year, but warns against budget vulnerability should the oil prices decrease. Rating-weakening factors are low quality of governance, faults in the institutional environment, corruption, lack of corporate climate and dependency on commodity prices. Ratings could improve in the future should tax and budget policies toughen, which would lead to decrease in oil and gas budget deficit and its vulnerability to commodity price volatilities, Fitch notes.

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