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Moody’s cuts Russia’s rating outlook to ‘negative’

Published time: June 28, 2014 17:59
Reuters / Brendan McDermid

Reuters / Brendan McDermid

Moody’s ratings agency has cut Russia’s outlook to negative, citing the threat to the Russian economy from the Ukraine crisis and a deterioration in Russia’s medium-term growth outlook.

Moody’s Investors Service held Russia’s overall rating at Baa1 against a background of the country's strong fiscal and external accounts.

However, it warned that the spread of the conflict in Ukraine has raised the danger of a “geo-political event risk” for Moscow, including from Western sanctions.

Moody’s said in its report that it views the situation in eastern Ukraine as more difficult compared to Crimea, “given the complicated background of separatist forces and the outbreak of violence."

The investors service also cited Russia’s lower annual growth outlook, which has fallen to 1.7 percent from previous forecasts of three percent over the next five years.

It said the fall was more pronounced than in Russia’s “peer countries such as India, Italy, Kazakhstan, Mexico, and South Africa, among which the median and average decline is estimated at only around 0.2 percent points by the IMF.”

The report says that Russia’s Baa1 rating remains constrained by its weak institutions and an over-reliance on oil price developments.

It also citeds a “lack of structural reforms” and a “declining working age population” as reasons for the negative outlook. These factors add to “downward pressure on Russia's potential growth rate in the coming ten years,” the report states.

If Russia’s domestic growth outlook were to deteriorate further, Moody’s warns, there could be a downgrade of Russia’s sovereign rating, “in particular if lower growth were to negatively affect Russia’s fiscal and external accounts.”

But the agency did not cut Russia's sovereign rating, saying it does not foresee the conflict getting worse or further lowering Russia's growth.

The investors service also said there could be stabilization in the ratings outlook for Russia, which “could be triggered by a resolution of the crisis in Ukraine and a reversal of the downward trend in Russia’s medium-term growth.”

The “enactment of appropriate measures to increase the country's economic growth potential, economic diversification or to improve its institutional strength” could result in a ratings increase, states the report.

Comments (73)

 

Ykpaine 02.07.2014 00:21

Le Ruscino 30.06.2014 13:58

Looking at the hard facts of numbers as a betting man; in 50 years from now US won't exist; merely a scrawny shadow with its cancer exposed; its wealth (which has not left already) but Russia will be stronger by far than it is today - this is a real cold hard undeniable fact(??)
Now the big question is should I have said 10 years?

  


You shouldn't bet Ruscino - America will be energy independent soon. Soon there will be nothing Russia has that anyone wants.

Everyone already leaving Russia with zero population growth. Everyone wants to go America. Bad bet.

 

Ykpaine 02.07.2014 00:12

Suzanne Majo De Kuyper 30.06.2014 21:02

All four American Rating agencies are completely corrupt and have been for many years. The are now US weapons of world economic war....weapons of mass destruction.

  



Everything is US Weapon of World Economic War. If you don't know that you don't know anything. US is by far the greatest economic engine in world and if they go down - the entire world's economy implodes too. So be careful what you wish for. What do you think happened after the New York Trade Center Towers were attacked on 9/11? World recession - which some have not recovered even now.

 

Suzanne Majo De Kuyper 30.06.2014 21:02

All four American Rating agencies are completely corrupt and have been for many years. The are now US weapons of world economic war....weapons of mass destruction.

View all comments (73)
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