Fitch Ratings has affirmed Belarus's Long-Term Ratings at 'B-' with a Stable Outlook. The Short-Term Foreign-Currency and Local-Currency Issuer Default Ratings have been affirmed at 'B' and the Country Ceiling at 'B-', the company's statement reads.
Fitch notes that Belarus's ratings balance high external vulnerabilities and a track record of frequent crises with relatively strong public finances and structural indicators.
GDP per capita and human development in Belarus well above peers. At the same time, a protracted dispute with Russia regarding gas prices that started in 2016 could further pressure external accounts, FX generation capacity and economic activity.
According to the data of Fitch, macroeconomic performance of Belarus is much weaker than peers. Liquid assets are the lowest in the 'B' category.
Fitch estimates that Belarus' current account deficit rose to 5% of GDP (USD 2.4 billion) last year, up from 3.7% (USD 2 billion) in 2015. Fitch forecasts that current account deficits can fluctuate at 4.4% in 2017 and 2018. Nevertheless, Belarus' gross external financing requirement (not including short-term debt), as a percentage of international reserves, is 146%, among the highest of Fitch-rated emerging market sovereigns. Net external debt (55% of GDP) and external debt service (23% of CXR) are double their respective 'B' medians, Fitch states.
Fitch notes that Belarus' government debt was 52% of GDP at end-2016, below the 56% 'B' median. Debt is highly exposed to currency risk, as 80% is foreign currency denominated.
Fitch states that sovereign foreign currency debt service is forecast at USD 3.4 billion in 2017, with external debt payments accounting for USD 1.8 billion. The government's financing plan increases the reliance on non-debt foreign currency revenues, partly derived from oil customs duties and exports, and a return to international capital markets.
Fitch expects the economy of Belarus to remain in recession in 2017, but the pace of contraction to decelerate. The positive impact of the oil price and neighbors' recovery could be limited by reduced oil imports volume from Russia. According to Fitch's forecast, inflation in Belarus could hover around 11% in 2017 due to expected utility tariffs' adjustments.