Fitch upgrades Russia’s economic outlook, citing impressive cash cushion from oil revenues

International ratings agency Fitch has improved its forecast for Russia’s economic growth this year to 4.3% from the previously expected 3.7%, said Douglas Winslow, Director at Fitch Ratings.

According to the agency, the higher GDP growth is expected as a result of legislative reforms aimed at removing structural restrictions on growth while maintaining macroeconomic stability. Fitch analysts also pointed to a significant strengthening of the budget and external accumulative buffers due to consistently high oil prices and other revenues.

Fitch has maintained its forecast for Russia’s GDP growth of 2.7% in 2022 and 2% in 2023.

Inflation in the country is expected to hit 6% this year, 4.2% in 2022 and 4% in 2023, Fitch said. The key central bank interest rate will grow from the current 6.75% to 7% this year, according to the forecast. The agency’s analysts expect the rate to be reduced to 6% in 2022, and to 5.5% in 2023.

Among the negative factors affecting the growth of the Russian economy, the agency named the introduction of additional Western sanctions, which undermine macroeconomic and financial stability. Fitch also noted the increasing impact of oil price volatility on the Russian economy and the deterioration of the sovereign balance of payments, including liabilities growth in the large public sector.

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