27 January 2015, Tuesday, 13:37

S&P downgraded Russia’s rating to speculative BB +, outlook negative

 

UFA, 27 January 2015. /Bashinform News Agency, Elvira Latypova/. The night before the Standard & Poor's International rating agency downgraded Russia's sovereign rating from BBB- investment to speculative BB +, with "negative" credit watch, the media inform with reference to the S&P.

"The downgrade reflects our view that Russia’s monetary-policy flexibility has become more limited and its economic growth prospects have weakened. At the same time, we also see a heightened risk that external and fiscal buffers will deteriorate due to rising external pressures and increased government support to the economy", Finam quates S&P.

According to S&P analysts, Russia’s financial system is weakening; The central bank faces increasingly difficult monetary policy decisions. S&P marks that a sharp increase in the key rate of the Central Bank to 17 percent in December 2014 led to a brief appreciation of the ruble, but then it continued weakening. The interest rate on interbank loans increased significantly, rising significantly above the key interest rate, and then declined slightly.

Lending will remain locked, and this prevents recovery, S&P analysts consider. Inflation in 2015 will exceed 10 percent. Weakening of the ruble will hit the incomes of population and deprive the economy of its traditional driver — consumer demand.

GRP growth is projected in the range of 0.5 percent compared to 2.4 percent on average for the previous four years. The budget deficit is expected to grow.

The government in the next three years is unlikely to be able to effectively solve the structural problems: to overcome corruption, reduce the excessive presense of the state in the economy, improve poor entrepreneurial and investment climate, «Vedomosti» cites the assessment of S&P.

The rating to be revised in April. It is not excluded its further downgrading.