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#9 - JRL 7019
S&P Reviews Russia's Prospects For Investment Grade
The following is a press release from Standard & Poor's:

NEW YORK (Standard & Poor's) Jan. 13, 2003--Standard & Poor's Ratings Services today issued a new commentary article that concludes that it make take some time for The Russian Federation to be assigned an investment-grade rating.

According to the commentary, entitled "Russia : The Ascent to Investment Grade Will Take Time," the country has received seven positive rating actions over the past two years, a record in Standard & Poor's history. However, while there is growing expectation that Standard & Poor's will soon assign an investment-grade long-term foreign currency sovereign credit ratings to Russia , the reform process on which this action will be based may have progressed beyond earlier expectations but is far from complete.

"The political and economic risk associated with Russia's creditworthiness has materially diminished since a combination of political, economic, and structural factors led to the 1998 debt crisis," said Sovereign Analyst Helena Hessel. "Russian President Vladimir Putin has managed to resuscitate market confidence with continued progress on reform and prudent economic policies, particularly an unwavering commitment to fiscal consolidation. However, the accompanying risk is serious enough to keep Russia's ratings two notches below investment grade, she added.

The study states that, while Standard & Poor's appreciates Russia's recent significant progress on political stability, structural reform, and macroeconomic stabilization, these accomplishments supported the country's upgrades from selective default status to the 'B' category in 2001. "Standard & Poor's also acknowledges the important legislative steps toward political, administrative, and economic institution building achieved during 2002," notes Ms. Hessel. "The significant progress in these areas sustained Russia's several positive rating actions last year, which lifted the country's creditworthiness to a solid 'BB' category. However, there is a long lag time between enacting many of structural, legal, and administrative reform, their subsequent implementation, and then their actual impact on political legitimacy and economic performance," she said. In the meantime, Ms. Hessel concluded, the absence of a viable banking sector, low labor mobility, slow progress in demonopolizing the economy, and weak institutional structures make Russia vulnerable.

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