Russian economy resilient to oil market shocks – Moody’s

Russia is less vulnerable to external shocks linked to turbulence in energy markets than many other oil-exporting nations, according to rating agency Moody's.

The dramatic plunge in oil prices could cut fiscal revenue and exports by more than ten percent of GDP for most exposed oil-exporting sovereigns and could eventually weaken their credit profiles, Moody's analysts warned in a recent report. However, the impact would differ from nation to nation, depending on how much its economy is reliant on energy exports.

“The sovereigns most vulnerable to lower oil prices in 2020-21 are those with the highest reliance on hydrocarbons as a source of fiscal revenue and exports, and limited capacity to adjust,” said Moody’s senior analyst Alexander Perjessy. 

Russia is in a better position compared to other crude exporters thanks to its massive forex reserves and a flexible exchange rate, the agency concluded. According to the report, Moscow could see a decline in fiscal revenue and exports of less than three percent of GDP, while the fall in more vulnerable countries like Oman and Bahrain set to stand between four and eight percent. 

“The most vulnerable sovereigns are Oman, Bahrain, Iraq and Angola, where external vulnerability is high and capacity to adjust to the shock is limited. By contrast, stronger fiscal positions ahead of the shock buffer the credit implications for Qatar, Russia, Azerbaijan, Kazakhstan and Saudi Arabia,” the report said. 

Crude prices have been crashing in recent weeks as the coronavirus pandemic squeezed global demand for the commodity, coinciding with the breakdown of the output cuts agreement between global oil majors. US crude benchmark WTI was trading lower on Wednesday at $23.50 per barrel, Brent was also down to around $26 a barrel.

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