S&P downgrades Russia’s credit rating to “junk” category

Russia’s invasion of Ukraine triggered a wave of credit rating moves: S&P downgraded Russia’s rating to “garbage”, Moody’s put it under review to reduce it to “junk”, meanwhile, S&P and Fitch quickly cut the Ukraine due to payment concerns.

The financial markets Both countries have been blindsided by this week’s events, which are seen as the biggest military attack on Europe since World War II and have prompted tough Western sanctions on Moscow.

S&P lowered the Russia’s credit rating Long-term foreign-currency bonds to “BB+” from “BBB-,” and warned it could downgrade the ratings further, after gaining more clarity on the macroeconomic fallout from the sanctions.

“In our opinion, the sanctions announced to date could have significant negative implications for the ability of the Russian banking sector to act as a financial intermediary for international trade,” he said. S&P.

He also cut the rating of Ukraine to “B-” from “B”.

Russia now has an “investment grade” rating of Baa3 from Moody’s and an equivalent of BBB- by Fitchbecause it has one of the lowest levels of debt in the world, with only 20% of GDP, and almost 650,000 million dollars of foreign exchange reserves.

A downgrade, however, would lower that rating to the riskier category of “junk” or sub-investment grade.

The decision to review the rating for downgrade reflects the negative credit implications for Russia’s credit profile of additional and more severe sanctions being imposed,” Moody’s said in a statement.

Sovereign ratings reviews can take months, but are likely to be quicker this time.

Moody’s He said his decision would take into account the scale of the conflict and the severity of additional Western sanctions, which have already hit some major Russian banks, military exports and members of the president’s inner circle. Vladimir Putin.

He added that he would also weigh the extent to which Russia’s substantial foreign exchange reserves are capable of mitigating disruptions stemming from new sanctions and the protracted conflict.

“Moody’s will seek to conclude the review when these credit implications become clearer, particularly as the impact of the new sanctions takes shape in the coming days or weeks,” it said.

Moody’s it also put Ukraine’s already poor “B3” rating under review for downgrade.

However, Fitch hasn’t waited and immediately downgraded his rating from Ukraine in three steps, up to “CCC” from “B”.

He explained that “there is a high probability of a prolonged period of political instability, with a possible regime change as the objective of President Putin, which would create greater political uncertainty and could also undermine Ukraine’s willingness to pay the debt.” .

Moody’s he had also warned that a major conflict could leave Kiev struggling to meet debt payments.

Scopea smaller European rating agency, has calculated that the ukrainian public debt it could exceed 90% of GDP in 2024, from 50% today, while S&P Global also warned on Friday of a series of rating downgrades as a result of the war.

The International Monetary Fund (IMF) is exploring all options to help Ukraine with more financial support, said its director, Kristalina Georgieva.

The russian central bank has bolstered its banking sector with billions of foreign exchange and ruble liquidity, while the government separately pledged full support to companies hit by sanctions.

It’s not the first time Russia is demoted to the category of “garbage”. So much Moody’s What S&P similar measures were taken in early 2015, after the annexation of crimea and the collapse of oil prices caused a ruble crisis.

There are “serious concerns” about Russia’s ability to manage the disruptive impact of new sanctions on its economy, public finances and financial system, Moody’s said on Friday.


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