Fitch's Detailed Russian Economy Forecast

The Worst Phase Is Behind

Fitch believes that the worst phase of economic and financial crisis in Russia is behind. Energy sector shows signs of recovery. Such comments of Fitch rating agency experts were given in the seminars for investors on "Credibility of corporate issuers of Russia", which took place in Paris, London and Frankfurt.

Improvement of prospects for generating free cash flow of companies ratinged by Fitch in Russia and expectation of reducing of leverage to moderate levels were noted at the seminars. Reflecting these expectations is the fact that 38% of current ratings of corporate issuers in Russia are in the category of BB, while 23% - in the category of BBB. 

Russian oil and gas sector is currently supported by strong cash flow generation and ability to  fund capital expenditure and dividend payments, as well as by substantial liquidity position. Fitch expects  free cash flow generation in the sector as a whole will be about $ 3 billion by 2011 after a slight decline in 2010 associated with higher capital expenditure and investments, which were postponed as a result of the global financial crisis. In general, the agency believes that oil and gas companies of Russia occupy a comfortable position in their rankings, and in the short term, large-scale increase in ratings is unlikely to happen. 

In 2010 Fitch sees signs of recovery in the metals and mining industry of Russia. The outlook for the industry is stable. In Russia, the visible growth of domestic demand in the first half of 2010 by 30% is relative to the same period of the previous year, and Fitch expects growth in apparent demand by 12-15% and overall production volume in the 65-67 million tons of steel. The companies will maintain the focus on export. Steel prices will continue to feel pressure from weak demand and oversupply.


Nat LawyerForecast for the telecommunications sector of Russia as a whole is stable with a moderate positive dynamics. Operating sector indicators have shown strong resistance during the recession, and most operators have a moderate increase in revenue. Access to markets for debt and bank financing has improved, contributing to resolve remaining issues in the refinancing / liquidity. Stable generation of free cash flow is a key factor that could lead to positive changes in ratings.