Russia: High commercial risk amid rouble depreciation
In November, the rouble depreciated markedly (cf. graph). The sharp depreciation of the rouble since the beginning of the year (more than 45%) is largely explained by the geopolitical tensions (sanctions by the US and the EU that constraint Russia’s access to international financial markets) and lower oil prices.
It is also due to the fact that, since 2009, the central bank has moved from an exchange rate- to an inflation-targeting framework.
At the beginning of November 2014, the central bank stopped the remaining automatic support for its currency in order to preserve its foreign exchange reserves which had dropped by more than 15% between end December 2013 and end October 2014 according to its own figures.
Hence, the rouble could be considered as free floating nearly two months ahead of schedule (January 2015).
Impact on country risk
Of course, the sharp rouble depreciation has an important impact on the economy. In terms of credit risk, one should pay particular attention to companies highly indebted in FX currency that do not dispose of FX earnings or FX hedges.
The prospect for improvement is meagre given that the situation in Eastern Ukraine remains tense amid ceasefire violations on both sides.
Credendo Group : Country risk analyst, Pascaline della Faille