Russia's economy moved into the global mainstream when ratings agency Moody's gave it prized investment grade status, citing increasing prudence in fiscal and debt policies
Meanwhile, Russia lept in other rankings as corporate investors reported a more improved outlook on Russia than towards any other market. For the first time, Russia rated among the 10 most attractive investment destinations worldwide, likely driven in part by macroeconomic stability and tax reform, alongside resurgence of interest in the natural resources extractive industry, a consultantancy report said.
Moody's was reported to be the first international rater to confer a status which wipes clean much of the taint Russia's reputation gained by its financial default five years ago. The award lifts Russian foreign currency debt to Baa3 from Ba2. Upgrading was said to reflect a relatively low risk of debt default and "the strengthening of the government's commitment to prudent fiscal and debt management policies." Political infighting inside and outside the presidential administration was not seen to threaten the broad direction of pro-market reform and development.
Analysts said the move would open up Russia's economy to increasing international inward investment and fuel internal growth. The road to foreign funds would also be smoother for Russian businessmen, said global money-men.
Russia was among nations leading a reported surge of emerging markets into this year's top 10 on consultants A.T. Kearney's "confidence index." Global investors saw a higher likelihood of future investment in these markets as they sought to offset lower-than-expected growth in developed markets and tap into higher growth, lower costs and better-educated labor pools, the consultants said.
But Russia needed to make significant economic adjustments and fine-tune investment policies to build broader investor appeal, their study found. Russian foreign direct investment (FDI) remained concentrated in the resource sector and was perceived to remain "burdened, to varying degrees, with excessive bureaucracy and weak corporate governance, diminishing FDI potential."
This echoes reported comments from Moody"s vice president that Russia would have won the new status much earlier but for its inherent bureaucracy.