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Fiscal buffers and improved policy response will not materially weaken Russia’s credit profile at a time of low oil prices, Moody’s said in a new report, although it cut its estimate for Russia’s economic growth this year on the back of the slumping oil prices and the coronavirus-driven economic slowdown.
Moody’s revised down on Wednesday its outlook for Russia’s gross domestic product (GDP) growth to 0.5 percent this year, down from 1.5 percent growth expected earlier, due to the low price of oil, weakening demand outside Russia, and lower purchasing power of the Russian households.
Earlier this week, Moody’s said that Russia would be among the least hit oil-exporting nations in the price collapse, with fiscal revenues and exports expected to drop this year by less than 3 percent of 2019 GDP. To compare, the worst-hit oil nations – Iraq and Kuwait – could see those fiscal revenues and exports drop in 2020 by more than 10 percent of GDP this year. For Saudi Arabia, the drop could be between 4 percent and 8 percent of GDP, according to Moody’s.
“The sovereigns most vulnerable to lower oil prices in 2020-21 are those with the highest reliance on hydrocarbons as a source of fiscal revenue and exports, and limited capacity to adjust,” said Alexander Perjessy, a Moody’s Vice President – Senior Analyst.
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The most vulnerable oil producers are Oman, Bahrain, Iraq, and Angola, while “stronger fiscal positions ahead of the shock buffer the credit implications for Qatar, Russia, Azerbaijan, Kazakhstan, and Saudi Arabia,” Moody’s said.
Last week, Moscow admitted that its revenues from oil and gas would be US$39.5 billion (3 trillion rubles) lower than planned due to the tumbling oil prices and that Russia’s budget would be in deficit this year.
Russia has sufficient buffers to cope with the situation, Kremlin’s spokesman Dmitry Peskov said last week, reiterating the official Russian position that it can live with oil prices so low for up to ten years.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.