14 November 2018

Fitch Ratings - Moscow - 09 November 2018: Fitch Ratings affirmed the Russian Tyumen Region's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) at 'BBB-' with Positive Outlooks and Short-Term Foreign-Currency IDR at 'F3'.

The ratings reflect the region's debt-free position and strong liquidity resulting from its sound budgetary performance. 

Fitch has revised upwards its forecast of Tyumen's budgetary performance in 2018 following the sound collection of tax revenue in 9M18. Currently Fitch expects the region's operating margin to exceed 30% after an average value of 22% in 2016-2017.

As part of rating scenario, Fitch forecasts that the region will continue to to run a balanced budget over the medium term. 

Taxes account for more than 90% of the Tyumen region's operating revenue, indicating its strong fiscal capacity.  The largest of them is CIT, which contributes about 70% of the region's tax revenue. 

Tyumen's expenditure is less rigid than in most Russian regions, allowing it to cut expenses in case of negative dynamics in tax revenue. Additionally, high self-financing capacity funded by the current balance and capital revenue allows the region to maintain a low level of direct risk (direct debt plus other liabilities according to the Fitch's classification).

The region has had a positive net cash position with cash reserves and deposits exceeding both direct risk and contingent liabilities since 2009. The region's direct risk is negligible and limited to a budget loan of RUB321 million from the federal government. 

Tyumen's economy is focused on the oil refinery and extracting sector servicing, which supports its GRP per capita being 1.9x above the national median in 2016.

According to the estimates, the region's GRP growth will exceed 4% in 2018 (2017: estimate 1.3%) and will be about 2% per year in 2019-2021, which is in line with Fitch's expectation for Russia's GDP growth.  

The regional administration consistently follows a prudent budgetary policy and conservative debt practices, which is reflected in a historically low debt level and strong liquidity.  

Tyumen Region's ratings are constrained by the ratings of the Russian Federation ('BBB-'; Outlook Positive). Positive changes to the sovereign ratings would result in corresponding action on the region's ratings provided the region's credit metrics remain strong.

Additional information is available at www.fitchratings.com.