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.
Moody’s Investors Service has today downgraded Russia’s government bond rating to Baa3/Prime 3 (P-3) from Baa2/Prime 2 (P-2). The rating was also placed on review for further downgrade.
The key drivers behind the downgrade are:
- Moody’s expectation that the substantial oil price and exchange rate shock will further undermine the country’s already subdued growth prospects over the medium term; and
- Moody’s nearer-term concerns over the negative impact on the government’s financial strength of the erosion in official foreign exchange buffers and fiscal revenues.
Fitch Ratings has downgraded Russia’s Long-term foreign and local currency Issuer Default Ratings (IDR) to ‘BBB-‘ from ‘BBB’. The issue ratings on Russia’s senior unsecured foreign and local currency bonds have also been downgraded to ‘BBB-‘ from ‘BBB’. The Outlooks on the Long-term IDRs are Negative. The Country Ceiling has been lowered to ‘BBB-‘from ‘BBB’. The Short-term foreign currency IDR has been affirmed at ‘F3’.
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.
Communiqué, Meeting of G20 Finance Ministers and Central Bank Governors
Moscow, 15-16 February 2013
We, the G20 Finance Ministers and Central Bank Governors, met to discuss the global economic challenges of today and to bring forward the policy agenda agreed by our Leaders.