Russia is increasing its gold and currency reserves. This year, it could become the country with the fourth-largest reserves in the world for the first time in eight years, trailing only China, Japan, and Switzerland. This is Bloomberg's forecast.
Russia currently trails Saudi Arabia, but unlike Saudi Arabia, it's actively increasing, not spending its reserves. Over the last four years, Russia's gold and currency reserves have increased by 45% and have reached $518 billion. Meanwhile, Saudi Arabia decreased its reserves to $527 billion. Russia sends all of the proceeds from the sale of oil, which exceed $40 per barrel, to the budget. At the same time, Saudi Arabia's budget is based on a price almost twice as high.
Alexey Vyazovsky, vice president in an investment company: "We should admit that our central bank, which controls not only gold and currency reserves but the Ministry of Finance's funds, acts very competently. It's diversified its portfolio, moved it away from dependence on the dollar. Since the beginning of the year, an ounce of gold has become 17% more expensive in dollars. So, we made good money on our reserves. More reserves provide Russia with a safety cushion".
The issue of spending reserves is now very sensitive to Saudi Arabia. Oil quotes on the world market have substantially decreased since the beginning of the month. The reason is that the trade war between the U.S. and China goes on. After all, in the future, it could lead to the OPEC+ countries needing to decrease production again. The ruble also responded to the situation on the global oil market, although, it became less dependent on oil. At the beginning of the month, the dollar exchange rate increased by two rubles. Investors expected another important piece of news for the Russian market and took a lead from it in advance.
Yesterday, Fitch upgraded Russia's long-term foreign currency credit rating. Its rating was investment-grade before, now it's BBB. Fitch has a stable outlook on it. First Deputy Prime Minister, Minister of Finance, Anton Siluanov noted that Fitch, in fact, returned Russia's investment grade to its 2014 rating. In addition to that, he hopes that the other Big Three agencies will follow this example. The reason for the agency to take that decision was stated in its official announcement. This is improved macroeconomic stability, lower impact of oil price volatility on the economy, and higher resilience to external shocks. Fitch didn't shy away from the topical issue of sanctions. The official announcement also talks about it. They're sure that low national debt and large currency reserves will help Russia cope with external restrictions.
Alexander Isakov, economist at VTB Capital: "The interesting detail, which markets, and probably local investors, expect, is an assessment of sanctions' effects by a credit rating agency. Here, S&P... Fitch made a pretty standard commentary. It said that the prospects of sanctions are unclear and that anything can happen. But the package adopted not long ago doesn't materially threaten Russia's creditworthiness".
According to Fitch, Russia's credit rating is now as high as Mexico's, Bulgaria's, Kazakhstan's, and Hungary's. By the way, it's the only agency that didn't reduce Russia's rating from lower than investment-grade to the so-called junk rating. It has always better assessed the situation in the country and had a better outlook for it than Moody's and S&P. At the beginning of the year, Moody's increased Russia's rating. The agency noted that the decision means that the policies, adopted to strengthen the country's already reliable financial and other external indicators, have a positive effect. At the same time, S&P kept our country's rating at the BBB- level. This is the lowest investment grade. Investors assess how better indicators will influence the country's investment attractiveness.
Alexey Kornilov, investment analyst: "It'll have a positive impact on the entire credit market, corporate bonds. That's not all. It'll positively influence even direct investments, because if a country has a factor of safety, then it has an investment-grade rating, and it isn't the lowest, BBB-, there's some factor of safety, it provides more confidence and a higher inflow of investments to the country".
According to all three agencies, Australia, Germany, Switzerland, and Norway have the highest sovereign ratings in the world. Venezuela, Ukraine, and Jamaica have the lowest ratings.
