Fitch Ratings revises Belarus’ long-term IDR Outlook to Negative amid domestic political crisis

<p> MINSK, Nov 16 - PrimePress. Fitch Ratings has revised the Outlook on Belarus’ Long-Term Foreign-Currency Issuer Default Rating (IDR) to Negative from Stable and affirmed the IDR at ‘B’ amid the political crisis in the country. </p> <p>   </p> <p> “The revision of the Outlook to Negative reflects Fitch's view that Belarus's post-election political crisis has increased vulnerabilities emanating from relatively low international foreign exchange reserves and a weak banking sector,” Prime quotes Fitch as saying. </p> <p>   </p> <p> Greater political unrest could lead to additional pressures on international reserves and deposit outflows, increasing risks for macroeconomic and financial stability, reads the report. </p> <p>   </p> <p> Fitch forecasts general government debt (central and local government debt including 7.9% of GDP in guarantees) to rise to 52.8% of GDP in 2020, almost 11% above 2019 levels, due to a weaker Belarusian ruble (forecast 26% depreciation against the US dollar yoy) and the economic contraction. We forecast debt to rise to 53.8% of GDP by 2022, still below the projected 71% ‘B’ median. </p> <p>   </p> <p> “Macroeconomic imbalances will remain contained in our base case of policy continuity. We forecast average inflation at 5.4% in 2020 and to increase to remain close to 6% in 2021-2022, above the projected 4.2% for the ‘B’ median, balancing the impact of the Belarusian ruble depreciation against softening of domestic demand and administrative measures to rein in price increases of certain commodities. The current account deficit will rise moderately to 4.1% of GDP by 2022, up from 3.1% in 2020, reflecting the weaker ruble and slow recovery,” Fitch says. </p> <p>   </p> <p> The main factors that could, individually or collectively, lead to negative rating action/downgrade are the escalation of domestic political unrest precipitating macroeconomic and financial instability, for example due to rapid bank deposit outflows; external financing pressures and erosion of international reserves, for example due to failure to secure adequate external financing; a rapid increase in government debt/GDP, e.g. from exchange rate shocks, further weakening of growth prospects and/or crystallization of contingent liabilities. </p> <p>   </p> <p> The main factors that could, individually or collectively, lead to positive rating action/upgrade are a sustained reduction of pressures on the banking sector liquidity and international reserves, for example, due to reduced political uncertainty; a decline in government debt/GDP supported by sustained post-coronavirus fiscal consolidation over the medium term and higher growth. </p> <p>   </p> <p> As previously reported, S&amp;P Global Ratings affirmed in early October 2020 the long-term and short-term sovereign credit ratings of Belarus for liabilities in foreign and national currencies at ‘B’, Outlook Negative (as of September 2020). The agency said it might revise the forecast to ‘Stable’ if political uncertainty faded out, which would help stabilize the economic, budgetary and financial sectors of Belarus. </p> <p>   </p> <p> Massive protest actions against the official voting results began in Belarus after the presidential election of August 9, 2020, in which Lukashenko was declared the winner for the sixth time with 80.1% of the vote. According to official reports, over 7,000 people were detained, hundreds injured, and three killed in the first few days alone. End </p>

2020-11-16

Primepress