ACRA affirms Belarus’ long-term credit rating at “B+”, changes outlook to stable

<p> MINSK, Oct 4 - PrimePress. Russia’s ACRA has affirmed the following ratings to the Republic of Belarus under the international scale: </p> <p>   </p> <p> Long-term foreign currency credit rating at B+ and local currency credit rating at B+; </p> <p>   </p> <p> Short-term foreign currency rating at B and local currency credit rating at B. </p> <p>   </p> <p> The outlooks on the long-term foreign currency credit rating and the local currency credit rating are Stable. The Stable outlook assumes that the rating will most likely stay unchanged within the 12 to 18-month horizon. </p> <p>   </p> <p> “The outlook on the sovereign credit rating of Belarus has been changed from Negative to Stable to reflect the weakening of negative factors influencing the rating and the ratio of negative to positive factors shifting in favour of a balance. The main factor that mitigates negative trends is the country entering into agreements with the Russian Federation in principle on supporting the Belarusian economy through the provision of credit facilities and further economic integration. In addition, recovery of external demand has improved the situation for Belarusian exports and supported economic growth. Nevertheless, risks are still present related to the economic and financial consequences of existing and potential sanctions, the realization of contingent liabilities (in both the financial and non-financial sectors), and continued political uncertainty in the run-up to a referendum [to amend the Constitution] planned for early 2022.” </p> <p>   </p> <p> “The sovereign credit rating of Belarus is based on relatively high economic wealth and quality of human capital, moderate room for fiscal manoeuvre, and a relatively high level of export diversification.” </p> <p>   </p> <p> “Earlier monetary policy reforms and fiscal consolidation before the crisis created a certain cushion. Constraining factors include the small size and openness of the country’s economy, significant volatility of economic growth, the primarily non-market nature of the economy, and as a result, the large share of state-owned companies, significant dependence on foreign currency, small volume of international reserves, and poorly developed institutions of checks and balances.” </p> <p>   </p> <p> “ACRA expects Belarusian economic growth to recover to 2.7% in 2021 after a moderate decline (by 0.9%) in 2020, followed by close-to-potential growth of 1.5% in 2022. The recovery of economic growth in 2021 is the result of economic recovery of the country’s main trading partners, price growth for exported goods, as well as the IT sector’s stable positive contribution to economic growth. The risks of this scenario are associated with the emergence of new vaccine-resistant strains of COVID-19 and the effectiveness of the vaccination program.” </p> <p>   </p> <p> “In the short-term, Russia’s intent to support the country’s economy through lending is of key importance to Belarus. The risk of international sanctions being imposed, primarily by the EU, remains and may have a negative impact on Belarusian exports to European countries. The effect of existing sanctions on potash imports is limited as it they have not impacted one of the main exported products — 40–60% potassium chloride (the sanctions extended to potassium chloride with an active substance content of less than 40% and more than 62%). At the same time, the extent of the impact of restrictions on the purchase of petroleum products, which Belarus exported to the EU (around 8.5% of total exports in 2019 and 4.0% in 2020), will depend on the country’s ability to redirect exports to other destinations. At the moment, the key negative affect of sanctions is Belarus’s limited access to international capital markets and restriction of the activities of some international development banks in the country’s public sector.” </p> <p>   </p> <p> “In August 2021, inflation in Belarus amounted to 9.8%, which is close to inflation recorded this June — 9.9% — the maximum for the past 3.5 years. The main factors in this growth is not only the rupture of global production chains, which has caused a surge in food, medicine and fuel prices amid the global economic recovery, but also the depreciation of the national currency. In addition, the population’s inflation expectations are consistently above 10%, and reached 14.6% in June this year, their highest since records began in 2017. Amid the crisis in 2020, the National Bank of the Republic of Belarus (NBRB) decided to delay its transition to inflation targeting and cancel its meeting schedule for 2021, and the government used selected instruments of directional lending to support industries most affected by the coronavirus pandemic.” </p> <p>   </p> <p> “In ACRA’s opinion, these factors mean that inflation growth will remain high in the short term and create obstacles for reducing it to the target level of no more than 5%. The efficacy of monetary policy will be limited by both the aforementioned factors and the banking system’s significant dependence on foreign currency.” </p> <p>   </p> <p> “ACRA expects Belarus to record a budget deficit of 3.0% and 2.0% of GDP in 2021 and 2022, respectively, which is more optimistic than the official estimate (3.4% of GDP in 2021) due to faster growth of revenues compared to expenses. Expenses are growing mainly due to their increase under the budget article “national economy” (by 19%), which may be related to supporting the real sector and materialization of contingent liabilities. The primary sources of budget financing are previously accumulated account cash balances (assessed by ACRA at 9.9% of GDP in July 2021) and foreign currency-denominated borrowing due to the poorly developed national currency capital market. Russia continues to be the main external financing market due to deteriorating relations with Europe and the United States. The Eurasian Fund for Stabilization and Development may serve as a source of funding.” </p> <p>   </p> <p> “The risks of external debt refinancing remain. In 2021, the external debt of Belarus continued to grow and reached $42.3bn by the end of June. As of the end of Q2 2021, external debt due within 12 months amounted to $16.4bn (including $7.1bn of trade finance). As of the end of Q2 2021, the coverage of the country’s total external debt by reserves was 17.5%, and coverage of debt due to be repaid within 12 months was 45%. The rather low external debt coverage is aggravated by the limited access of Belarusian issuers to foreign markets and the shrinking base of international lenders. The Government of the Russian Federation and Russian banks are increasingly becoming the main lenders to the Belarusian economy.” End </p> <p>   </p> <p> The Analytical Credit Rating Agency (ACRA) was established in November 2015. ACRA shareholders are 27 major Russian companies and financial institutions with a 3.7% stake in the authorised capital, which totals over RUB3 billion. End </p>

2021-10-05

Primepress