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. Last Updated: 07/27/2016

Fitch Ups Russia's Rating a Notch

Fitch Ratings upgraded Russia's sovereign foreign currency credit rating on Tuesday to BBB+ from BBB as booming commodity prices have lifted economic growth and boosted public finances.

But it assigned a stable outlook, meaning a further upgrade is not likely soon.

"Enduringly high commodity prices are strengthening Russia's macroeconomic and financial position at a remarkable pace, further reducing the likelihood of any future risk to sovereign debt service," Edward Parker, head of Finch's emerging European markets credit analysis division, said in a statement.

The upgrade comes a week after Russia hosted a summit of the Group of Eight nations, showcasing its comeback from devaluation and domestic debt default in 1998 to claim a place at the top table of world diplomacy.

Before the summit, Russia signed a deal with the Paris Club of sovereign creditors to repay its entire stock of Soviet-era debt in a $22.3 billion deal .

But while the country outshines its emerging-market peers on most economic fundamentals, it runs risks typical for an oil-based economy.

Natural resources are the economy's great strength, but dependence on them makes Russia vulnerable to commodity price shocks and poses challenges to macroeconomic management, governance, competitiveness and diversification, Fitch said.

The upgrade was widely anticipated by analysts and its impact was largely priced to traded Russian debt and the ruble.

"The big impact comes when you see a move between the [ratings] brackets," said Peter Westin, chief economist at MDM Bank.

Russia lifted capital controls on July 1, opening the economy to foreign investment and saying it had enough gold and foreign exchange reserves to withstand any speculative attack on its currency.

Russia's reserves, the world's fourth largest, reached $256 billion last week. Of that total, the oil-funded stabilization fund, created to cushion the budget from a slump in oil prices, hit $77 billion this month.

"Now its time to look for new benchmarks. We used to compare ourselves with Mexico and South Africa; we can now aim at lowering our spreads over Chinese sovereigns," said Nikolai Podguzov, an economist at Trust Bank.

Fitch expects the country to run a budget surplus of 6.5 percent of gross domestic product in 2006. The paydown of its debt will reduce the debt-to-GDP ratio to 11 percent by the end of the year.