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S&P Raises Outlook On Russian Credit Rating, But Still Sees Risks

The Standard & Poors (S&P) agency has raised its outlook on Russian credit to “positive” from “stable,” saying it sees the country returning to economic growth after two years of recession.

S&P on March 17 cited improving growth prospects and a lower risk of large capital outflows in lifting its outlook, but it kept the actual long-term credit rating at Triple-B-minus, which is one notch above a junk rating.

S&P said continued international sanctions will keep a lid on growth, limiting the increase in gross domestic product (GDP) to 1.5 percent in 2017.

Still, that is an improvement from the 0.2 percent contraction in 2016.

The sanctions have been imposed by Western nations for Russia’s illegal annexation of Ukraine’s Crimea region and its support for separatists in eastern Ukraine.

For the period 2017-20, it said it sees an average GDP gain of 1.7 percent.

“Over the medium term, we expect that the economic recovery will be driven by the expected modest rise in oil prices, continued expansion of the oil and, particularly, gas sector in volume terms, as well as an uptick in household consumption,” it said.

But it said in the short term, the economy will remain constrained by international sanctions and structural impediments -- “such as the state’s pervasive role in the economy” -- and that the challenging business and investment climate “will continue to limit Russia’s ability to diversify away from commodities.”

Based on reporting by AFP and The Financial Times

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