Zee Beam News

This year will be become an indicator of Russia's further economic development, said Dr. Kristalina Georgieva, Director for the World Bank Russia program. She said investors putting money into Russia were optimistic about the country's economic situation, but they continued to consider different scenarios of Russia's economic development. Georgieva said the country's economic growth had slowed down. She reckons this is partly due to rising producer prices, fuelled by the strengthening ruble. Another factor is a quick rise in wages, which has outstripped economic growth in recent years. She also pointed to slow reforms in Russia. In this respect, Georgieva said it was particularly important that Russia's economic performance in 2005 was better than expected. On the upgrade of Russia's credit rating by Standard & Poor's, Georgieva commented: "The world believes that if the Russian Federation borrows money, it will not default." She rated S&'s move as a positive signal, showing that Russia was a reliable borrower. Standard & Poor's Ratings Services announced on Monday it had raised its long-term foreign currency sovereign credit rating on the Russian Federation to 'BBB-' from 'BB+'. It also raised its short-term foreign currency sovereign credit rating on Russia to 'A-3' from 'B', its long-term local currency sovereign credit rating to 'BBB' from 'BBB-', and its Russia National Scale rating to 'ruAAA' from 'ruAA+'. At the same time, Standard & Poor's affirmed its 'A-3' short-term local currency sovereign credit rating. The outlook is stable. On possible upgrades in the future, experts say the assignment of an investment-grade rating to Russia by Standard & Poor's would push up the price of ruble-denominated bonds and shares. Alexander Razumny of Mezhprombank believes this will be speculative growth, which will not tempt large foreign investors, especially pension funds, into Russia - something he thinks is only possible in the long term. For his part, Maxim Shein of BrokerCreditService expects S&P to raise its credit rating on Russia to investment-grade. He thinks this will have a significant effect on Russian bonds. "This will be a long-lasting effect," he noted.