Fitch monitors Russia

Fitch Ratings said it is closely monitoring how quickly the new government of Russia will act to reform the economy and hasten fiscal consolidation following the expected victory of Vladimir Putin in Sunday's presidential elections. Putin made large spending commitments prior to and during his election campaign, the agency noted, while members of the government's economic team recommended fiscal consolidation.

Having already increased public sector wages, pensions and subsidies, Putin has pledged to increase spending on the military, health provision and hike wages further. If delivered, these increases could cost $160 billion, or 8% of projected GDP, over his six-year term, Fitch said.

The agency said rapid growth in spending has already widened Russia's non-oil and gas fiscal deficit to 10% of GDP and pushed up the fiscal breakeven oil price to around $117 per barrel for 2012. Fitch previously said that a failure to make progress in reducing the non-oil and gas fiscal deficit back toward its pre-crisis target of 4.7% is one of the factors constraining Russia's rating at BBB.

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