Fitch Assesses Potential Implications of Protests in Russia

Navalny’s popularity spreading in Russia amid massive protests over his arrest

Fitch Assesses Potential Implications of Protests in Russia

Fitch Assesses Potential Implications of Protests in Russia

Budget expenditures may increase, and in the long term the authority of the government is undermined

The international rating agency Fitch was one of the first to assess the possible short-term and long-term consequences of the arrest of opposition leader Alexei Navalny and the massive protests in his defense that took place in Russia in late January and early February..

This is stated in the Fitch forecast published on Friday. The agency kept Russia’s long-term sovereign rating at BBB with a stable outlook. BBB is an investment grade rating indicating the current low risk of default. However, this is one of the lowest investment grade ratings..

Fitch’s forecast notes that Russia’s rating continues to be negatively impacted by the risk of new sanctions. At the same time, the agency does not expect the introduction of new US sanctions in the near future, since the Joe Biden administration needs time to develop its own sanctions policy. The risk of large-scale sectoral US sanctions, such as sanctions against sovereign debt or a ban on Russian banks to carry out transactions in dollars, is assessed by Fitch as low. The likelihood of introducing new targeted EU sanctions in connection with Navalny’s arrest, however, has increased.

The analysts of the agency describe the protests themselves as "more numerous than before". The potential for further social unrest is also noted. In the short term, Fitch sees no threat of destabilization in Russia. In this case, obtaining "United Russia" a constitutional majority in elections to the Duma can be difficult. The budget deficit may also grow.

"In the long term, longer protests could undermine government authority", – the forecast says. It also mentions the upcoming presidential elections in 2024. The amendments to the Constitution allowing Vladimir Putin to run for another term, according to Fitch, removed uncertainty, but at the same time created a number of problems, increasing the dependence of the system on one person and making it less likely to carry out institutional reforms, the absence of which, according to the agency, leads to growth protest moods and negatively affects the prospects for economic growth.

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