Banking & Finance Weekly Report.(Russian economic and business news briefs)
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MoodyCOs Investors Service might upgrade its credit rating for Russia by two notches, Bloomberg reports citing MoodyCOs managing director for sovereign ratings David Levey. The agency could make a decision by year-end, Levey told Bloomberg. RussiaCOs sovereign rating is Ba3, three notches below the co-called investment ratings. MoodyCOs last upgraded RussiaCOs rating in November 2001 by two notches. It changed the rating outlook in April 2002 from stable to positive. MoodyCOs in September upgraded Kazakhstan to the investment level from Ba2 to Baa3. The ratings for Russia and Kazakhstan differ by three notches, which is perhaps too much, he said. Levey did not rule out the possibility that the rating might be raised by two notches. FINANCIAL POLICY STRUCTURAL IMBALANCES THREATEN STEADY RUSSIAN GROWTH - WORLD BANK The World Bank on the whole agrees with the Russian government’s projections that GDP growth will measure 4% this year and inflation will be 14%, but warns that structural imbalances could stunt further economic growth. The state sector remains inefficient, management of state resources is inadequate, and the situation in the public services sector is often dispiriting, the bank said in its annual report on the Russian economy. The bank’s economists are most concerned that the Russian economy is still overly dependent on prices for oil and gas, while investment goes primarily into the fuel and energy sector. Russian GDP growth is slowing, and capital investment growth this year will be lower than at any time in the period from 1999 through 2001, the bank said. Overall corporate profitability is declining, and payment discipline has begun to weaken in some sectors. Consumption growth is overtaking investment growth, and rising real incomes are encouraging consumers to buy more and more imported goods. World Bank experts looked in detail at wages in Russia’s regions and various sectors of industry. Production of oil and the state sector not only still attract the largest share of domestic investment, they are also far ahead of the rest of the economy in terms of wage growth, the report states. This picture is compounded by the ever growing gap between Russia’s regions in the level of their development and living standards. If one keeps in mind the goal of ensuring sustainable economic growth, then the creation of conditions and institutions necessary for the diversification of the economy is becoming an ever more urgent task, the World Bank said. FINANCIAL POLICY WORLD BANK DOUBTS 5-6% GROWTH REALISTIC FOR RUSSIAN ECONOMY If the current slow rate of investment growth continues, Russia will probably not manage to achieve the expected annual GDP growth of 5% to 6% in 2003-2010, the World Bank’s senior economist in Russia Christoph Ruhl said on Tuesday. The World Bank, which has just published a report on the Russian economy in the first nine months of 2002, thinks Russian GDP will grow by about 4% this year, as the government has forecasted, Ruhl said at a news conference. But in 2003-2010, the country’s GDP growth could fall below 4% if investment growth does not exceed 2.5% per year, he said. Average capital investment growth in the first nine months of 2002 slowed to 2.5% from 7.5% in 2001. The World Bank expects investment for all of 2002 to also increase by about 2.5%. |