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#11
S&P expects to upgrade Russia due to econ progress
By Julie Tolkacheva

MOSCOW, Dec 13 (Reuters) - Rating agency Standard & Poor's said on Thursday it was likely to boost its ratings for Russia due to its sound economic progress, although the timing was uncertain.

Russia has impressed analysts and markets with its economic and political reforms in the last two years, although a shadow has recently fallen over the economy due to fears of pressure from a slide in world oil prices.

But Cynthia Stone, S&P's managing director for Russia and the CIS, said things were going well. S&P's last action on Russia was to raise its outlook to positive in October.

"It means that we see an improvement in Russia's investment climate, progress in structural reforms and better economic factors," she told a news conference.

"We expect in the future that there will be an upgrade, but when it will happen we cannot say," she added.

S&P's current rating for Russia is single-B and the long-term issuer credit outlook is positive.

Moody's has the country at Ba3, with a positive outlook while Fitch has a rating of B+ for Eurobonds, with a stable outlook.

S&P president Leo O'Neill said Russia still had some work to do. "Russia needs to create a track record of reliability in world markets," he said, although he added that Russia was making "great strides" to this end.

Russia's economy is expected to show growth of around 5.5 percent this year after a record 8.3 percent in 2000.

OIL PRICES

A fall in oil prices, revenues from which are one of the main engines of the economy, is expected to bring GDP growth down to some four percent next year.

But Stone said structural reforms were helping to smooth out the fall.

"Of course, the Russian economy is heavily dependent on the oil price and so it is not a factor that can be ignored in any assessment of the economic situation here," she told Reuters.

"However, taking a slightly longer view...continuing progress in the area of structural reforms is probably the most significant factor now."

She said Russia had made a lot of progress in demonstrating its willingness and ability of service the external debt.

"Of course, our analysts do recognize that the oil price has a dramatic effect on the budget," Stone said.

"(However), we do not see that (oil prices) over the longer term as the absolutely key factor determining where our rating will be."

But she said S&P would like to see a move away from such reliance on the oil sector and already saw some encouraging signs of this.

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