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Russia earns investment grade rating from Moody's

Moscow

RUSSIA was raised to investment grade at Moody's Investors Service, which cited the country's strength to handle risks from US sanctions to an oil selloff.

Moody's lifted Russia's rating to Baa3 from Ba1 on Friday, putting the energy giant on par with Italy, South Africa and Hungary. S&P Global Ratings had upgraded Russia from junk last year, bringing it in line with Fitch Ratings.

Back in 2015, Russia got downgraded to junk by the ratings company as a slump in crude and foreign sanctions drove the economy into its longest recession in this century. Oil prices have now recovered, and the nation has returned to fragile growth, though the restrictions haven't been lifted and the US has threatened to implement more.

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"It's a big positive. Moody's decision could lead to big inflows," said Ilya Feygin, senior strategist at WallachBeth Capital LLC in New York. "Moody's recognised that Russia has cleaned up a lot of stuff internally. Russia's not in a situation where a downturn in oil prices will completely crash Russia and make it unable to pay its bills. There is a chance that Russia will outperform EM short to medium term."

President Vladimir Putin's government passed legislation last year to increase the retirement age for the first time in Russia's post-Soviet history, and it also pushed through an increase in the value-added tax that took effect on Jan 1. The measures will add to Russia's efforts to build up reserves and diversify currency holdings as a buffer against possible new US sanctions.

New measures by the Trump administration could "be contained without material damage to the country's credit profile", according to Moody's. BLOOMBERG