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“The main driver for changing the outlook on Russia’s Ba1 government bond rating to stable from negative is the government’s enactment of a medium-term fiscal consolidation strategy that is expected both to lower the government’s dependence on oil and gas revenues and to permit the gradual replenishment of its savings buffers,” the influential rating agency said in a press release on Friday.
The Russian economy has been steadily regaining momentum from recession to growth despite EU and US economic sanctions on Moscow for its alleged involvement in the Ukraine crisis.
In the face of sanctions, Russia has moved to diversify its economy, pursuing investments in different sectors and with different European, Chinese and Japanese firms, to name a few.
“The Russian economy is now recovering after a nearly two-year-long recession,” Moody’s says, adding that downside risks had eased in the country.
However, Moody’s warned of geopolitical risks adding to economic volatility and said that the government must fulfill its long-delayed promises of structural reforms to enhance the investment environment.
The ruble currency, for example, has been gaining strength against the dollar.
The dollar fell by 0.19 per cent to 57.10 rubles earlier; it fell nearly 27 per cent against the ruble year on year.
“The floating exchange rate has proven to be an effective shock absorber over the last two years, cushioning the impact of the terms of trade decline on the economy — particularly for commodity exporters and the federal government, which still gets roughly 36% of its revenue from oil and gas taxes,” Moody’s said.
The near-stabilization of oil prices above the $50 mark has also helped boost revenues as most economic policy was designed with oil prices at $40.
In 2017, GDP growth is expected between one and 1.5 per cent.
The BRICS Post with inputs from Agencies