1. Credit risks in the Republic of Belarus
Minsk, 28 March 2019

2. Rating-Agentur Expert RA (RAEX-Europe)
The Agency is active since 2013 in Frankfurt am Main
CRA, registered by the European Securities and Markets Authority (ESMA)
Official status of External Credit Assessment Institution (ECAI)
International rating service team with diverse academic and professional experience
RAEX Group has more than 20 years of experience in the rating industry

3. RAEX-Europe ECAI mapping
Mapping, approved by the European Commission in April 2018:
Credit quality step
RAEX-Europe
Fitch
Moody’s
S&P 1
AAA, AA
Aaa, Aa 2 A 3
BBB
Baa 4 BB Ba 5 B 6
CCC,CC, C, D, E
CCC, CC, C, RD, D
Caa, Ca, C
CCC, CC, R, SD/D

4. RAEX-Europe activities
Assigning credit ratings to:
Sovereign issuers
Sub-sovereign issuers (regions)
Banks
Insurance companies
Companies from non-financial sectors
Assigning non-credit ratings: ESG ratings (environmental, social and governance)
Additional services for stock-exchanges: green bond second opinion
Business-conferences and presentations in EU

5. Sovereign rating list of RAEX-Europe:
Country
Sovereign government rating
Dynamics
Outlook
Latest review date
National currency
Foreign currency
Armenia
BB-
Confirmed
Stable
Belarus B B-
Positive
China A+
Cyprus
BBB-
Upgraded
Germany
AAA
Kazakhstan
Kyrgyzstan
Russia
USA
Uzbekistan

6. Positive factors
Real GDP growth at 3% in 2018 as compared to 2,5% a year ago, combined with moderately high levels of economic development expressed in GDP per capita and HDI index
Real GDP growth, y-o-y
Source: IMF and local statistical authorities

7. Positive factors
Government debt structure in terms of maturity and creditors
The overall fiscal balance is expected to be at 1,5% of GDP
Fiscal position of the government, % of GDP
Source: IMF

8. Restricting factors
Gross public and publicly guaranteed debt is expected to reach 51,7% of GDP by the end of 2018
Debt position of the government
Source: WB, IMF

9. Restricting factors
Quality of the monetary and fiscal policy remains moderate despite significant improvement
Moderate level of institutional development according to the international organizations
Monetary policy indicators, %
Source: NBRB

10. Negative factors
Local stock market remains underdeveloped with market capitalization around 2% of GDP
Contingent liabilities remain high
Assets distribution in the banking system, % of total assets
Share of SOEs in the average output ( ), %
Source: NBRB, IMF

11. Negative factors
Wide spread between the Belarusian USD-denominated government bond yield and 10Y U.S. treasuries
The inflation level increased to 5,6% by end-2018, after reaching a record low inflation rate level of 4,6% by the end of 2017
Consumer price index (end of period, y-o-y), %
Source: IMF and local statistical authorities

12. Negative factors
The banking sector soundness remained weak despite having slightly improved
Capital adequacy and profitability metrics of the banking system of Belarus
Source: NBRB

13. Stress-factors
High dependence from the Russian government and Russian-led funds
Despite positive dynamics, financial dollarization remains a problem for the economy representing 65% of total deposits and 48% of total loans in December 2018
Deposits and loans dollarization in Belarus, % of total portfolio
Source: NBRB

14. Currency risks
High level of FX-denominated government debt - more than 80% of total debt
The BYN still remains a risky and volatile currency, despite the slight decrease in volatility in
Despite the positive dynamic over the last years, the amount of international reserves remained low at USD 7,2 bn by end-2018 which covers 29% of the country’s external debt and only 2,3 months of imports
Significant dependence on imported goods with imports to GDP expected to exceed 70% in 2018

15. Positive outlook
The positive outlook on ratings reflects our expectations about:
gradual recovery of the economy
stabilizing inflation
gradual decline of dollarization levels
improvement of the quality of monetary and fiscal policy
mitigation of debt repayment risks by end-2019 due to support from the Russian government and Russian led financial institutions
Positive outlook means that in the mid-term perspective there is a high probability of upgrading the rating

16. Thank you for your attention!
Vladimir Gorchakov Associate Director Rating-Agentur Expert RA GmbH Walter-Kolb-Straße 9-11, Frankfurt am Main Теl ext