S&P lifted the outlook to positive from stable, leaving its foreign-currency rating one step short of investment grade at BB+, on par with Indonesia and Bulgaria, according to a statement on Friday.
Moody’s Investors Service ranks the country at the same level, while Fitch Ratings has it one step above junk.
S&P, which raised Russia’s outlook to stable in September, cited stabilising growth in gross domestic product for its latest decision.
“External pressures appear to have abated significantly over the last 12 to 18 months,” S&P said. “The positive outlook indicates that we may raise our ratings if the Russian economy continues to adapt to the relatively low oil-price environment while maintaining its strong net external asset position and comparatively low net general government debt burden.”
The move puts Russia on the verge of regaining the investment status it lost two years ago when the collapse in oil prices, compounded by international sanctions over its involvement in the war in Ukraine, pushed the world’s biggest energy exporter into recession.
Helped by stabilising oil prices, it has since adjusted by allowing the rouble to trade freely and keeping fiscal and monetary policy tight, reining in inflation from a 13-year high in 2015 to near the central bank’s 4percent target.
The improving sentiment in Russia is playing out in the market, with the rouble gaining about 7 percent against the dollar in 2017, the best performance in developing Europe. The currency gained for a third day on Friday in Moscow, adding 1 percent against the dollar.
While strains on the economy are easing, the finance ministry still wants to reduce the budget shortfall by one percentage point each year to balance the books by 2020.
This year’s deficit may be about 2percent of gross domestic product, compared with an initial plan for 3.2percent, Finance Minister Anton Siluanov said last month.
Authorities are also bringing back their three-year fiscal planing process after shifting to a one-year system during the crisis.
“Consolidation will depend partly on the pace of proposed tax, pension, and labour reforms,” S&P said. “However, since these measures could be unpopular, it is likely that most of them will be launched after the 2018 presidential elections."