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Fitch cuts Russia outlook due to political risk

January 16, 2012
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MOSCOW—The Fitch rating agency on Monday downgraded the outlook on Russia's debt, citing political uncertainty.

Fitch said in a statement Monday it had changed its outlook from positive to stable, meaning it was less likely to upgrade the country, which has been relatively unaffected by the European debt crisis and recently enjoyed profits from rising oil prices.

The rating agency cited the potential impact of weakening global growth and domestic political uncertainty as key reasons for the move.

Allegations for fraud surrounding recent parliamentary elections sparked popular protests across the country, including rallies of tens of thousands of people in Moscow that were the largest protests of Russia's post-Soviet era.

The agency said that, although there is little doubt Prime Minister Vladimir Putin would win March's presidential election, it is unclear how he would respond to the protests. Fitch said recent events "highlighted the limitations and risks associated with Russia's political model."

Russia's gross domestic product rose by 4.2 percent last year and the country has been running budget surpluses for the past several years.

But the country is likely to face growing budget deficits in the coming years after Putin has pledged hikes in military and social spending which analysts say could hurt the economy.

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