Moody’s Investors Service has today downgraded the government of Russia’s sovereign debt rating to Ba1/Not Prime (NP) from Baa3/Prime-3 (P-3). The rating outlook is negative. This rating action concludes the review for downgrade that commenced on January 16, 2015.
Moody’s downgrade of Russia’s government bond rating to Ba1 is driven by the following factors:
- The continuing crisis in Ukraine and the recent oil price and exchange rate shocks will further undermine Russia’s economic strength and medium-term growth prospects, despite the fiscal and monetary policy responses;
- The government’s financial strength will diminish materially as a result of fiscal pressures and the continued erosion of Russia’s foreign exchange (FX) reserves in light of ongoing capital outflows and restricted access to international capital markets;
- The risk is rising, although still very low, that the international response to the military conflict in Ukraine triggers a decision by the Russian authorities that directly or indirectly undermines timely payments on external debt service.
We are reviewing our assessment of Russia’s monetary flexibility and the impact of the weakening economy on its financial system. As a result, we are placing our long-term sovereign credit ratings on Russia on CreditWatch with negative implications. We expect to resolve the CreditWatch upon the conclusion of our review, which we expect by mid-January.
London, 19 September 2014 — Moody’s Investors Service has today announced its decision to maintain the negative outlook on France’s government bond rating, which it has affirmed at Aa1.
The agency’s decision to affirm France’s Aa1 rating reflects Moody’s view that, despite negative credit pressures, the country retains significant credit strengths, including the size and wealth of the economy, as well as its affordable debt burden despite a continuous, gradual erosion of its economic and fiscal strength. The affirmation is also supported by renewed government commitment to accelerating the pace of structural reform, introducing a more consistent approach to economic policy, and proceeding with its budget saving plans.
That said, Moody’s decision to maintain a negative rating outlook reflects the rating agency’s view that the execution risks associated with implementing the government’s proposed structural reform initiatives are significant, given the strength of vested political interests that might oppose them and the poor track record in implementing such reforms.
In a related rating action, Moody’s has today announced its decision to maintain negative outlooks on the Aa1 ratings of Société de Financement de l’Economie Française (SFEF) and of Société de Prise de Participation de l’État (SPPE). The two entities’ Aa1 rating are affirmed, in line with the sovereign’s rating. Moody’s also affirmed the Prime-1 rating of SPPE, including its euro-denominated commercial paper programme. The senior debt instruments issued by the two entities are backed by unconditional and irrevocable guarantees from the French government.
- We are affirming our ‘BBB/A-2’ long- and short-term sovereign credit ratings on the Republic of Italy.
- The affirmation reflects our view of Italy’s wealthy and diversified economy, as well as our expectation that the government will make some progress on important structural and fiscal reforms.
- The outlook on the long-term rating remains negative, reflecting our view of risks to the public sector balance sheet from weak real and nominal growth prospects.
On June 6, 2014, Standard & Poor’s Ratings Services affirmed its unsolicited ‘BBB’ long-term and ‘A-2’ short-term sovereign credit ratings on the Republic of Italy. The outlook on the long-term rating remains negative.