Updated September 22, 2008

   The large international institute has assessed the urgent measures undertaken by Russia’s authorities to back the country’s financial system. Standard & Poor’s Rating Agency has downgraded the forecast of Russia’s credit ratings because of "the escalating uncertainty concerning the economic policy" on the fight against the liquidity crisis.

   At the end of the previous week, the international rating agency, Standard & Poor’s (S&P), revised the forecast on Russia’s sovereign credit rating from "positive" to "stable". "The forecast revision is predetermined by the escalating uncertainty concerning the economic policy related to the fight against the liquidity crisis at Russia’s financial markets", S&P’s credit analyst Franklin Gill marked. The long-term credit ratings remained unchanged – under obligations in foreign currency, BBB+, under obligations in national currency, A-, as well as short-term sovereign credit ratings, A-2. Moreover, the credit rating under national scale was approved (ruAAA).

   "The timely decision of Russia’s government to allocate the budgetary facilities to the banking system can encourage the maintenance of trust to it, nevertheless, the situation may require significant capital inflow", the Agency’s experts explain the rating lowering. So, the Agency expects that within the nearest 12 months, "Russia’s budgetary and international reserves will be cut".

   In the present situation, the Agency emphasizes such negative factor as the significant growth of the capital outflow from Russia in September "that has resulted partly from the Russian authorities’ twin policy concerning the stockholders’ rights". "The closing of the foreign sources on the facilities attraction can finally influence on the real economy", in S&P commented the situation. "The reduction of the lending growth may lead to the reduction of the private sector’s revenues, and it is unclear, whether the companies will manage to settle their debt obligations. So, the budget deficit may take place already in 2009-2010".

   After S&P has revised the forecast on the country credit rating, it has downgraded also the forecast on the ratings of the Moscow city, the Bank for Development and Foreign Economic Affairs and the Russian Development Bank from "stable" to "positive" as well.

   Fitch Rating Agency doesn’t intend to revise the forecast on Russia’s sovereign rating that is stable at the moment. However, Fitch assesses some Russian borrowers somewhat in the other way. On Friday, September, 19, Fitch Ratings started to revise the rating of the construction company, PIK Group, towards the probable lowering. Before Fitch began to revise PIK Group’s assessments, its experts emphasized also the escalation of risks due to "the range of some negative shocks and growing pressure in Russia’s banking sector". The analysts of Moody’s Agency are more optimistic. "Despite the collapse of the local stock markets and the considerable capital outflow that took place within the last couple of weeks, the governmental currency assets are still very large and can face the serious cost of financial intervention", Moody’s senior analysts on Russia and the CIS Jonathan Shiffer marks in the Agency’s report.

   Russia’s experts consider that S&P’s decision is facile and "too peremptory". "The apocalyptic scenario of S&P’ analysts has to be applied to the American reality instead of the Russian one", the analyst of Renaissance Capital Nikolay Podguzov considers. "Russia’s financial system has better positions now to face the consequences of the world financial crisis". The key factor in the country rating is a state’s ability to settle its debts, and at the moment, there is the budget deficit in Russia and its debt to GDP totals less than 5%, Mr. Podguzov marks. In the opinion of Alfa Bank’s economist Natalia Orlova, S&P responded to the reduction of the state’s opportunities on the long-term investments. "The major state holdings turn into the deposits in the banking system", she says. "However, it doesn’t mean that Russia can’t fulfill the obligations on its external loans".

   However, some experts don’t eliminate the probability of the further assessments revision for Russia. "Today’s measures directed to the stabilization of Russia’s currency market will result in the reduction of the country’s gold and foreign currency reserves", the analyst of AntantaPioglobal Investment Company Maxim Osadchiy says. "In addition, the capital inflow to the stock market will aggravate this process". Earlier, the high level of gold and currency reserves mostly has been the key reason of high assessments of the international ratings agencies, and it means that their lowering may result in the revision of the country ratings.