Russian President Vladimir Putin at the Guggenheim Museum in New York in 2005
Photo: Dmitry Azarov
| Other Photos |
 |
|
 |
Four Factors Affect Russian Development
The international Fitch Ratings agency has issued a report predicting that 2007 will be full of events for Russia and identifying four factors that will influence the country. The agency assigned the Russian Federation an issuer default rating of in foreign and national currencies of BBB+ with a prognosis of “stable,” which means that he agency does not foresee changing that rating.
The factors that the agency identified as possibly affecting Russian creditworthiness this year are oil prices, tax and budgeting policy, investment and the upcoming handover of power.
High oil prices were a key factor in Russia's rapid and large-scale improvement of macroeconomic and financial indicators, which recently led to the raising of the country's sovereign credit rating. Oil prices have dropped 10 percent this year and 32 percent from their peak, however. Fitch assumes an average price of $50 per barrel of Urals oil this year. The Russian federal budget assumes a price of $61. Russia should be able to continue increasing its Stabilization Fund and currency reserve assets in either case, however. Those assets should total $135 billion and $370 billion by the end of the year, Fitch says.
Weakening of taxation and budgetary policy is being observed, which could lead to greater inflation and pressure on the real exchange rate of the ruble. The IMF predicts that oil deficit in the 2007 federal budget will rise to 8.3 percent this year, compared to 4.3 percent in 2004. Fitch expects the budget surplus to fall this year to 3 percent, compared to 7.5 percent last year. Nonetheless, the agency says, the budget will remained balanced even if the price of a barrel of Urals falls to $38, so Russian state finances will remain a positive factor in its rating.
The change of power in the December parliamentary elections and March 2008 presidential elections will be a period of indeterminacy for Russia. Although the successor named by Russian President Vladimir Putin is most likely to win at the polls and current political tendencies are likely to be maintained, the low level of development and transparency of democratic institutions in Russia may lead to destabilizing battles between business and political interests within the Kremlin and outside it.
Investment increased by 12 percent in Russia in 2006. The net influx of private capital amounted to $42 billion, compared to $1 billion in 2005. Direct foreign investment also set a record of $31 billion in 2006. These inflows should encourage continued growth of the GDP and diversification of the economy. Negative changes in the investment climate in the country may counteract those trend, however.
www.kommersant.com
|
|
|
