On 18 October 2013, Standard & Poor's Ratings Services revised to stable from positive the outlook on its foreign and local currency sovereign credit ratings on the Republic of Belarus.
At the same time, S&P affirmed its long- and short-term foreign and local currency sovereign credit ratings on Belarus at 'B-/B'.
The press release says that the weakening in the country's external balances and rising pressures on the currency render its external position highly fragile. “The worsening current account deficit and rising exchange rate pressures highlight Belarus' vulnerability to external financing. Furthermore, growth continues to underperform, which increases the risk that the government will bolster expansionary policies to boost domestic consumption,” reads the press release.
The stable outlook balances Belarus' political risks, high external indebtedness, and weakening external liquidity against its relatively high per capita GDP for the ratings level and durable capital base. Belarus benefits from a strong industrial capital stock and a highly educated workforce. According to S&P, real growth in per capita GDP, which the agency calculates to average about 3.5% over a 10-year period, is in line with peers in the same GDP–per-capita category.
Standard & Poor's estimates contingent liabilities from the financial system, state-owned enterprises, and government guaranteed debt as moderate. S&P expects inflation to average 18% in 2013, down from 59% in 2012. While inflation has markedly declined, it remains high and susceptible to pass-through from the developments on the exchange rate front.
“Government policy leading to a sustained improvement in competitiveness, a diversification of funding sources, and increased availability of foreign exchange could eventually support an upgrade. We could also consider raising the ratings if we saw an improvement in external balances indicated by lower external financing needs, lower external debt, and improved current account balances,” reads the S&P press release.
Belarus is in a large net external liability position amounting to an estimated 64% of current account receipts (CARs). External debt (net of official reserves and financial sector external assets) is estimated at 52% of CARs in 2013 and forecast to rise to 64% by 2016. At end-June 2013, government debt in foreign currency stood at 78% of total government debt.