The International rating agency Moody’s today lowered its forecast for the Russian banking system as a whole to “negative” from “stable”, said in a statement posted on the official website of the agency.
“Changing the outlook for the Russian banking system to” negative “reflects concerns that weakness in the global economy and volatility in financial markets will weaken the operational situation in Russia, reflecting adversely on the banks by systemic liquidity squeeze, slower credit growth and depressed asset quality”, was send in a press communique. The report reflects the agency’s expectations for the underlying credit conditions in the banking sector for the next 12-18 months. From Moody’s predicts that because of weak economic recovery growth of real gross domestic product of Russia will slow to 2.8% in 2012 from this year’s expected 3.8%. The Russian economic growth depends mainly on oil prices, which increases the risk that global demand for energy may further affect the operational environment for Russian banks in the forecast period.
“Volatility in global financial markets, limited access to common funding continued rapid movement of capital and the pressure on the ruble has led to pressure on liquidity in the Russian banking system”, said Eugene Tarzimanov, vice president of Moody’s.
“We expect this to continue and lead to slower credit growth, leading to reduced access to credit for the recipients, as banks increase interest rates and tighten conditions further. This will further lead to suppressed growth and an increase in reserves to cover bad loans”, he added.
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Proposed by the Obama budget is marginally positive for the credit rating of U.S. in the short term, but “almost no chance Congress to approve it without major repairs, says Moody’s Investors Service. In the long term budget proposal offers no solution to the key structural problems of social programs and pensions, says Stephen Hess, senior analyst at Moody’s. Adequacy of estimates in the plan are also in question, he said.
“These weaknesses, combined with the still high debt levels are an indicator that will require additional measures to improve government finances and debt position in the long run,” says Hess. The credit agency, which recently warned of increasing probability of placing a negative outlook to the rating of the U.S. which is currently the highest possible – AAA, noted that this year’s projected budget deficit of 10.9 percent of gross domestic product ( GDP) of the country is the most serious since World War II and is largely a consequence of extending the tax incentives introduced by former U.S. president George Bush. It is however an open question whether the government will raise taxes for the rich since 2012, the expiry of the current tax relief. The credit agency questioned some projections included in the draft, particularly for discretionary government spending except for national security, which the administration will decrease by 11% in nominal terms in 2021.
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The International rating agency Moody’s will review over the next three months the credit rating of Portugal with a possible decrease in the direction of one or two degrees, said in a statement the agency, quoted by RIA Novosti. Now Portugal’s credit rating is “Aa2″. The intention of Moody’s is continuing to assess the situation to deteriorate to government debt. In the view of analysts from the rating agency, taking into account the small size of the economy of Portugal and its poor growth performance of these public debt may not fully reflect the rating of “Aa2″. At the end of April ratings agency Standard & Poor’s lowered the long-term credit rating of Portugal with two degrees – from “A +” to “A-” to “negative” outlook. At the end of 2009 government debt of Portugal was up nearly 77 percent of gross domestic product (GDP) of the country, for comparison, the external debt of Greece has 120% of GDP. Meanwhile, analysts note that in Portugal the threat can come from many large private sector debt, which exceeded the indicator for Greece. According to forecasts by the European Commission (EC) GDP growth this year Portugal will be 0.5 percent and for 2011 – 0.7%.
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Moody’s Investors Service to raise the credit ratings outlook for Latvia and Lithuania, as their economies recovered faster than expected. Baa1 rating to the prospect of Lithuania was upgraded to stable from negative, and also that of Latvia, but rating Baa3. Credit rating agencies increase the prospects for regional stability signals and actions of governments to address the budget deficit. Over the past two months by Standard and Poor’s and Fitch Ratings raised its outlook for Estonia, Latvia and Lithuania stable from negative. “The Lithuanian economy is stabilized faster than expected and those of other Baltic countries,” said Kenneth Orchard, an analyst at Moody’s. According to him the recession ended in the third quarter of last year and this will have a moderate positive effect on the finances of the Government, expressed in a smaller budget deficit and slower growth of debt. In Latvia, the “worst of the recession has passed and will support the restoration of Finance of the Government and the banking sector,” said Orchard. “The prospect of a disorderly devaluation of the currency is now unlikely.” Latvia requested assistance from the EU and the International Monetary Fund amounting to 7.5 billion in 2008, having acquired its second largest bank. In the fourth quarter of the country’s economy contracted by 16.9 per cent.
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